Credit Card Strategies: Efficient credit card management can either strengthen or weaken your credit profile, directly impacting your credit score. A high credit score is essential for accessing loans, credit products, and favorable interest rates across the country.
Understanding how credit card activity affects your credit score is crucial for maintaining a healthy financial profile. Credit cards are more than just convenient payment tools—they are a reflection of your borrowing and repayment habits. Proper management and timely payments are key to sustaining a strong borrowing profile.
Simple Credit Card Moves That Improve Your Credit Score
1. Stay on Top of Payment History
Payment history is the most influential factor in your credit score, accounting for 35% of your total score.
- Set up alerts and reminders for all credit card and loan payments.
- Pay bills on time, whether via UPI, auto-debit, or other methods.
- Missing even a single payment can cause a steep drop in your credit score.
Pro Tip: Treat credit card bills like utility bills—they should always be paid promptly.
2. Keep Credit Utilisation Low
Credit utilisation measures the percentage of your total credit limit that you use, contributing roughly 30% of your credit score.
- Aim to use less than 30% of your total available credit.
- Example: If your credit limit is ₹2,00,000, maintain an outstanding balance below ₹60,000.
A low utilisation ratio signals responsible borrowing, while consistently high usage may indicate financial dependency.
3. Think Twice Before Closing Cards
Closing a credit card, especially an older one, can impact your credit score by:
- Increasing your credit utilisation ratio if total available credit drops.
- Shortening your credit history, which is a medium-impact factor.
Keep long-standing cards open, even if rarely used, to maintain your creditworthiness. The only exception is cards with high annual fees without benefits—consider alternatives or promotional waivers.
4. Diversify Your Credit for a Healthy Mix
A good credit mix includes various types of credit, such as:
- Credit cards
- Personal loans
- Home loans
- Education loans
Demonstrating responsible repayment across multiple credit types over time positively influences your score. Lenders value borrowers who manage different financial obligations effectively.
Tips for Smart Credit Card Use
| Tip | Why It Matters |
|---|---|
| Pay bills on time, preferably in full | Avoid interest and maintain strong payment history |
| Keep utilisation under 30% | Signals responsible credit usage |
| Avoid multiple applications at once | Reduces hard inquiries on your credit report |
| Maintain older cards active | Maximises credit history length |
| Monitor your credit report regularly | Identify and dispute inaccuracies quickly |
Why Credit Card Management Matters More Than Ever
With credit card issuances surpassing 108 million by December 2024 and projected to reach 111.19 million by mid-2025, managing credit wisely is increasingly important.
Regulatory guidelines from the RBI emphasize transparency and consumer protection, making informed credit card usage essential for building a strong, sustainable credit profile.
Key Takeaways
- Prioritize on-time payments to build a solid credit history.
- Keep credit utilisation low to avoid appearing over-reliant on debt.
- Maintain older cards and diversify credit types for a robust score.
- Regularly monitor your credit report to correct errors and protect your score.
