In India, credit scores are compiled by bureaus such as CIBIL, Experian, Equifax and CRIF High Mark, typically ranging from 300 to 900 points. According to reports from The Economic Times, anything upwards of 750 is generally considered strong enough to unlock better interest rates and faster loan approvals. The score is built from several key factors: reliability of past debt repayments, credit utilization levels, account age, credit mix, and frequency of new credit applications. A credit card, when used properly, touches almost every one of these factors, making it a powerful tool for building a strong credit profile.
The most common misconception is that paying only the minimum amount due keeps credit scores safe. As reported by The Economic Times, paying only the minimum avoids defaults but leaves the rest of the balance accruing interest at rates north of 30-40 per cent annually. The recommended practice is paying the full statement balance every cycle before the due date, which maintains spotless repayment history and prevents interest charges from impacting savings or investments. Credit utilization, staying under 30% of available credit limit, is the second major factor. A card with a ₹1 lakh limit should ideally carry a running balance below ₹30,000 to avoid signals of dependency on credit. According to Experian, it can take a month or two for changes to your payment history or credit utilization to reach credit-reporting bureaus, making timely payments crucial for score improvement.
Having multiple credit cards with a combined limit of ₹5 lakh does not automatically improve your credit score, as reported by NDTV Profit. The credit utilization ratio (CUR) makes up about 30% of your credit score, representing the amount of credit used compared with total available credit limit. For example, if you have three credit cards with a combined limit of ₹5 lakh and your outstanding balance is ₹50,000, your credit utilization is 10%. If the same ₹50,000 outstanding is against a total limit of ₹1 lakh, the utilization would be 50%. A lower utilization ratio is generally viewed more favorably by lenders because it indicates the borrower is not heavily dependent on available revolving credit. The 30% credit utilization rate is considered ideal.
Closing old credit cards is generally a mistake from a credit-score perspective, according to The Economic Times analysis. Length of credit history matters, and old cards provide evidence of long-standing, well-managed credit relationships. Closing these accounts shortens average account age and can reduce overall available credit, pushing up utilization ratios even if spending hasn't changed. The report recommends keeping old cards open for occasional small purchases to maintain activity, unless they carry steep annual fees that aren't worth paying. Payment history makes up 35% of your credit score, and managing three separate bills means you must track multiple due dates to maintain a healthy credit history. Missing payments or carrying large outstanding balances can hurt your credit profile, even if your total available limit is high.
According to The Economic Times, building a strong credit score doesn't require financial wizardry but consistency and understanding what the algorithm rewards. The key habits include paying full balances, maintaining utilization below 30%, avoiding new applications in clusters, and keeping old accounts active. A credit card used with basic discipline, full payments, modest utilization, patience with new applications, and reluctance to close old accounts quietly performs most of the score-building work on its own. The number of credit cards you own depends on your lifestyle needs - for travel miles, shopping benefits, or fuel surcharge waivers. However, whether you have one or many credit cards, make sure to spend responsibly, use them carefully, and make payments on time. A ₹5 lakh total credit limit can provide greater financial flexibility and potentially help keep utilization low, but more available credit by itself does not guarantee a higher credit score.
