What Are Credit Cards? What Factors Affect Your Credit Score And How To Improve Your Credit Score?


Credit cards have become extremely popular nowadays and are being used more often than not. There are individuals who have several credit cards to their names this is because of the several advantages that credit cards have to offer.

Credit cards are nothing but rectangular pieces of plastic or metal that help people make payments, but they are quite different from debit cards. When it comes to a debit card, you usually have a bank account in which you have money and when you use a debit card you basically sue the money available in your account. But that is not the case when it comes to credit cards, in simple terms, a credit card lets you borrow money from the bank, and then you have to return the borrowed money with interest within a certain amount of time.

This is just a simple way of understanding how credit cards work. But owning and using a credit card is not a child’s task it can either help you or ruin you. Remember, whenever you use a credit card you owe the financial institution money and you are expected to pay back the money within the agreed-upon time frame. Whether you pay back on time or not, your payment history is reported to the credit bureaus and that affects your credit score. So when you use a credit card make sure that you make your monthly credit card payments on time and also make sure that you do not exceed the maximum credit limit.

This way you can ensure that your credit score is always good.

Every bank will have different payment terms such as HDFC Credit Card Payments terms will differ from ICICI credit card payment terms, so make sure you do your research well and choose a credit card that suits your spending style. You should know that there are several different kinds of credit cards you can choose from so make a wise decision.

When you have a credit card that suits your spending style you can be sure that your credit score will be good if you make your payments on time and if you do not go beyond the set credit limit.

Credit Score

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A credit score is nothing but a 3 digit number that represents your credit worthiness, it ranges from 300 to 900. As per the Credit Information Bureau India Limited (CIBIL), the ideal credit score is 750 and above. According to the official CIBIL website, 79% of the loans are given to individuals who have a CIBIL score of 750 and above.


Financial institutions check people’s credit score before sanctioning loans to them.

Credit Score Ranges

Here are the credit score ranges that you should know about as it affects your banking activities and your ability to get a loan

750 and Above (Great)

This the highest score bracket that you can be on, when you have a score of 750 and above there are several benefits that you get. If you apply for a loan then your loans will be approved easily and quickly and furthermore, you will be charged lower rates of interest.

700-749 (Good)

When you have a credit score between 700 and 749 it means you have a pretty good credit score, with this score your will relatively low rates of interest on your loans, and those loans will be approved quite quickly too.

650-699 (Fair)

If your score lies between 650 and 699 then you have an average credit score. If you happen to apply for a loan with this score you will still get it, but it may take a little more time to get approved as there may be other variables that the bank will take a look at.

600-649 (Poor)

Any score between 600 and 649 is considered to be poor and while you can still get a loan with this score, you will be charged high rates of interest, which may increase your debt burden.

600 and Below 

If your credit score is below 600 then you seriously need work on increasing it. If you happen to apply for a loan then there is very little chance of it being approved, even if it approved you can sure that you will be charged extremely high rates of interest on it.

Factors That Affect Your Credit Score

Here are a few factors that affect your credit score, understanding this can help you increase your credit score.

Imbalance In The Debt To Income Ratio

The debt to income ratio is one of the most important factors that affect credit scores.

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You should always keep your debts like loans, credit card bills, or mortgages below 50% of your income. This acts as an assurance to the banks that you are not spending the money you make for paying debts and that you can pay back any new that you take.

Payment History

This among one of the most crucial factors that affect your credit score and also affects your ability to get a loan with lower rates of interest.

If you have paid back your previous loans on time it will have a positive effect on credit score. This basically means that you are more likely to pay back the borrowed amount if you happen to take out a new loan.

Age Of Your Credit 

Old credit usually plays an important role when it comes to determining your credit score. If you’ve handled your past credit responsibly then it will have a positive impact on your credit score and also reflect positively when financial institutions are considering whether to sanction a loan to you or not.

Multiple Enquiries For Loans May Harm Your Trustworthiness

It is considered a red flag by financial institutions when you apply for several loans at the same time. They will question your ability to repay them. So be cautious when you’re applying for a new loan and make sure you apply for a loan that you know you can repay on time.

Improve Your Credit Score

There are several ways you can repair your credit score and you should always make sure you increase and maintain a good credit score. To do that you should always track your credit scores, that you if you find any mistake or any unpaid loan or credit card bills, you can pay it and rectify your mistake, or sometimes it so happens that you’ve paid all your loans but you haven’t updated that and that can be a crucial mistake, so tracking your credit score can help you find your mistakes. Other things you should do is to make sure you pay credit card bills and loans on time to make sure your credit score doesn’t come down.


These are some of the things you have to bear in mind when you own a credit card or if you’re going to obtain a credit card. It is important to follow these pointers to maintain a good credit score without which obtaining loans with a lower rate of interest would be almost impossible. But most importantly make sure you obtain a credit card that suits you the best.

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Author: Simon RobertEasyInfoBlog is a multi-author blog. We have experts and professionals in various fields who share their ideas and expert knowledge to help you with your daily information needs. Thanks for reading!

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