These days, credit cards are popular spending tools as they offer cashless transactions and  convenient contactless payment. Additionally, using credit cards is tempting as they bring rewards and perks in the form of points, surcharge waivers, cashback, air miles, etc. Individuals use, not a single credit card, but more than one, as different cards offer varied benefits. This begs the question whether using more than one credit card can lower your CIBIL score. While using more than one card doesn’t lower your credit score per se, it’s the failure to repay your credit card bills that harms CIBIL score.

What is a CIBIL Score? 

CIBIL India is a sub-organization of TransUnion, an American multinational. The company has introduced the CIBIL score which is a way to calculate an individual’s credit rating. Credit scores in India are called CIBIL scores. A CIBIL score is a three-digit number that exhibits your credit history and rating. The numeric summary ranges anywhere from 300 to 900, and 750 and above is considered satisfactory. The closer your credit score is to 900, the better your financial health is. This ensures lenders that you are good for the loan being issued and repayment is guaranteed. Individuals always want to learn how to increase their CIBIL score as this helps while taking a loan.

Calculating your Credit Score 

Your CIBIL score or credit score is calculated  and determined by means of a mathematical formula. This is based on factors like:

• Repayment of debt
• Debt timelines
• How often loan and credit card applications have been accepted/rejected
• Existing loans
• Credit card use and settlement of dues

Your CIBIL score is an indication of your creditworthiness.

Multiple Cards and Poor CIBIL Score

Holding and using more than one credit card may pose a challenge in maintaining an appropriate CIBIL score. This is because, the more credit cards you use, the more you are spending. As a result, you have to settle more than a single credit card bill, and if you fail in a timely manner, or with full repayment, you run into debt.  You stand to accumulate not only your balances on credit, but a plethora of charges such as delayed payment fees and interest charges on outstanding balances. All this leads to an unhealthy CIBIL score. In such a scenario discovering ways of how to increase CIBIL score are next to impossible.

Loan Inquiries and Low CIBIL Score 

More than in any other circumstance, CIBIL credit score is pertinent while you are applying for a loan. Credit utilization and loan inquiries account for close to 40% of your CIBIL score. If your credit score is being checked frequently, that means you’ve been attempting to take a number of loans. As a result, this implies that the chances of defaulting on loan repayments may be high. 

The Final Word

The best way to have and maintain a good credit score is to prevent circumstances leading to debt. You will get a better picture of CIBIL scores and how maintaining a good one is important on Finserv MARKETS.