6 Discreet Ways Credit Cards Ruin Your CIBIL Score



We have written at length about the purpose and benefits of making your loan EMI repayments on-time. We plead, and then admonish, borrowers who take their loan responsibilities lightly. Although we are focused on providing you a personal loan without any hassles or worry, we are still concerned about your credit score. There is a possibility that along with clearing your personal loan with Loan Singh, you might also own a credit card. And suppose you do not handle your credit card smartly, it may lead to a domino effect – making you struggle to cope with your personal loan repayments, as well.

Both personal loan and credit card are examples of unsecured credit. Unsecured credit does not involve any collateral, but is availed dominantly through your CIBIL score. Owning a credit card has its advantages, but there are some factors that can affect your CIBIL score if you concentrate solely on statement repayment. We look at some of these discreet factors and also shed light on a credit card’s working and relation to CIBIL.


Credit Card Features

A credit card is a rectangular piece of plastic that is equipped with a magnetic strip. This magnetic strip, on the back of the card, houses your registered account information with the card issuing company. Your name and credit card number, on the front, act as the identifier. Swiping the card allows the magnetic strip on your card to identify your credit account and process the payment at POS terminals. The card details also help you pay for online purchases. As mentioned earlier, a credit card is an unsecured type of credit. Your CIBIL score and monthly income determine if you are worthy to avail a new one. A revolving account is created by the card issuing company, granting you a line of credit. You are assigned a credit card limit, which is a threshold set by the card company, for you to spend on credit. You can later pay back the amount spent, during a fixed tenure, along with interest and charges. The credit card also contains an RFID chip that protects your card against identity theft.

When you use your credit card to make payments, the merchant validates your credit account and asks the bank if the payment can be processed. If all goes well, your purchase is added to your credit account. Merchants pay fees to credit card companies – to accept credit cards at their end; and credit issuing companies (or banks) receive the merchant fee as revenue. All these expenses and purchases are recorded by the card issuing authority, and sent to you in the form of a bill.

A billing cycle is a period set, within which all purchases and payments are accounted for and billed. It is usually set for 30 days. A grace period of 15-25 days is added to the total number of days of the billing cycle. If the previous month’s balance payment is made before the end of the grace period, no charges are incurred by the cardholder. In case the card holder fails to pay the total outstanding amount by the due-date, a minimum balance has to be paid to the credit card company. This amount is usually 5% of the total balance.


Relation between CIBIL and Credit Card

Credit bureaus like CIBIL look at your past credit repayment patterns to determine how much of a risk you pose to the credit lending institution. Whenever you go to a credit card company to apply for a new credit card, a hard inquiry is raised by the company to CIBIL. The inquiry is basically a request to fetch your credit repayment history. The bureau then sends the history back to the institution in the form of a CIBIL report; with a compiled numerical score called CIBIL Score.

As a result, CIBIL basically dictates your approval to avail of a new credit card. This is the same with a digital lending platform, such as Loan Singh, or traditional lending institutions.


6 Ways Credit Cards Can Ruin Your CIBIL Score

Credit Cards are certainly not the only reason for a dip in your CIBIL score. There are some more things you need to keep an eye on when dealing with credit cards apart from doing your best when it comes to monthly payment of your credit card bill. Let’s look at 6 such things that can ruin your CIBIL score.

Applied but Rejected

There can be instances where you applied for a new credit card and got your application rejected. Then you might have applied again at another credit card issuing company, and faced the same fate. These hit your CIBIL score badly thanks to the hard inquiries each application creates.

Don’t Pay Just the Minimum

If you are in the habit of making regular bill payments without any delay then your CIBIL score is sure to improve. But if you are being regular and paying only the minimum due and carrying forward some amount to the next month, it is a big NO! This is an indication of struggling finances. So ensure you make regular but complete payments of your credit card bill.

Multiple Cards with Loans

If you are already owning more than 3 credit cards and struggling to clear their respective bills, then it is obvious you are on the verge of falling into credit card debt. These debts will certainly reduce your CIBIL score.

Pay Even in Dispute

You have to pay your credit card bill each month even if you are in the midst of a dispute. The dispute could be due to a double swipe by a cashier or inaccuracies in previous month’s statement. Irrespective of the dispute, you have to clear your bill on time to avoid penalties and a CIBIL score hit.

Add-on Dues on Primary Card

In case your spouse or family members are using supplementary credit cards, then the payment of dues is linked to your primary credit card. So better keep a check or halt wayward spending done on the supplementary credit cards otherwise the monthly credit card bill would be too much of a burden on your shoulders.

Max-On Max-Out

If you are provided a credit limit of say Rs. 1 Lakh, remember to never exceed this limit during the course of the billing cycle. It is wise to not exceed 60%of the approved credit limit. This will ensure your CIBIL score does not drop.


27 thoughts on “6 Discreet Ways Credit Cards Ruin Your CIBIL Score

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