credit score with credit card

Build Strong Credit Score with Credit Card

It is no secret that a strong credit score and a well-established credit history are instrumental to your financial health and well-being. And as a result, people are always on the lookout for ways to build their credit and help them establish their creditworthiness in the eyes of prospective lenders. However, people often end up underestimating or overlooking the significance of credit cards when it comes to building credit.

According to a Statista Report, in 2022, various banks and credit card companies in India issued close to 73 million credit cards. The credit card industry has grown at a CAGR of 20% over the last five years.

However, credit cards in India have garnered a reputation for promoting irresponsible financial behaviour and trapping individuals in a never-ending cycle of debt. While this perception may be somewhat biased, it has some validity. Acquiring a new credit card has become relatively easy, provided you meet the required documentation criteria.

Nevertheless, many individuals find it challenging to utilise credit cards wisely and often find themselves burdened by debt, primarily due to making only minimum payments on their cards. As a result, the total credit card outstanding in India, as of January 2023, is INR 1,86,783 crore, a whopping 9.3% increase from the previous financial year.

But if you use them correctly, credit cards can significantly improve your credit health by improving your credit score and establishing a strong credit history. In fact, credit cards are a great way to demonstrate responsible use of credit and effective financial management on your part, which, in turn, translates to your creditworthiness for lenders.

And it does not matter if you have limited or no credit history; you are just starting your credit-building journey or have an average credit score. You can build your credit score with credit cards.

Whether you're starting from scratch or looking to improve your existing credit score, our blog empowers you with the information you need to take control of your financial future. Building a robust credit score is a journey, and we're here to guide you every step of the way.

Does Using a Credit Card Increase Your Credit Score?

The short answer is, “Yes, you can use a credit card to increase your credit score”. Credit cards are one of the best ways to demonstrate how to manage your credit and improve your credit score effectively. However, you need to make sure that you pay the credit card bill regularly – in full – and only utilise a small portion of the total available credit to maintain a low credit utilisation ratio.

How to Increase Credit Score Using a Credit Card?

With the increasing ease of getting a credit card, it has become one of the easiest and most effective ways to build your credit history. This holds true whether you are just starting, have no credit history, or have an average credit score. Simply being smart with your credit use and following some tips can help you maximise the benefits of your credit card and use it to increase your credit score.


For Individuals with Limited Credit History/ Zero Credit History

If you are a young professional – just starting – or have no (or limited) credit history, you need to:

Choose the Credit Card Wisely

Choosing the right credit card is crucial to build and maintain a strong credit history because a wrong choice can have devastating implications for your credit score and financial health.

The first thing you need to consider is your financial habits and the needs the credit card would fulfil.

For example, if you are a frequent traveller, you can opt for travel rewards credit cards that can help you maximise rewards for flight and hotel bookings and other travel expenses. You can use cashback credit cards if you mainly use the credit card for grocery shopping, dining out, or online shopping. These cards give a percentage of your spending as a cash reward, which you can use to help pay your credit card bill.

When selecting your credit card, considering your financial needs and capabilities can help you maximise the rewards and maintain a good credit utilisation ratio while making regular payments. As a result, you can build solid credit without penalties for non-payments, late fees, or zero credit utilisation.

Best Credit Cards for New Professionals

Entry-level credit cards: require minimal documentation and are best suited for individuals just starting their professional journey. These cards have comparatively lower annual fees and credit limits but still offer users benefits like reward points and cashback.

A secured credit card can also be a great option if you have limited or no credit history and still need a credit card. You will need to put down a security deposit as collateral to avail of secured credit cards, and the deposit amount would often act as the credit limit. Banks often issue them to help customers build their credit profiles.

As a young professional, you can use these cards to build a good credit score while enjoying the benefits.

For Individuals with Bad/Average Credit Score Trying to Improve Their Credit Score

If you are an individual with an average credit score and want to improve it, you need to:

Understand the Reasons for Your Bad Credit Score

The first step in improving your credit score is understanding the reasons behind average or poor credit scores. You can start by obtaining a comprehensive credit report and analysing the reasons for a low credit score. Equipped with this understanding, you can use credit cards to improve your credit score.

Some of the most common reasons – and corresponding corrective actions – for a poor credit score are:

  • If you have delayed loan payments, you can consider getting a long-term pre-approved personal loan against your credit card to repay the loan.
  • If you have missed credit card payments, you can convert the unpaid dues to EMIs to help you manage payments better.
  • If you have trouble managing multiple payment timelines, you can consolidate all your outstanding dues into a single credit card to have a better understanding of your debt and manage your repayment plan accordingly.

Use Credit Cards Responsibly

Using credit cards responsibly can help you gradually build your credit score. This includes using credit cards frequently to make small purchases and paying your credit card bills on time. You should also prioritise paying in full – whenever possible – to minimise interest on credit card bills and avoid entering the vicious cycle of minimum payment and debt traps.

Use Multiple Credit Cards

You can use multiple credit cards to manage different expenses and purchase needs while simplifying repayment. Additionally, multiple credit cards can also help you lower your credit utilisation ratio by increasing your total credit limit. Both these factors can help you build your credit score.

Key Factors to Keep in Mind for Building Credit Score with a Credit Card

Credit cards are double-edged swords, with a tremendous potential to help you build credit score but can just as easily lead you into a debt trap if you are not careful. And it is crucial to be vigilant in using your credit card responsibly to build a good credit history and credit score with credit cards.

Keeping the following things in mind can help you make credit cards work for you and build a strong credit score if you have no credit history or an average credit score:

Do Not Miss Any Credit Card Payments

This can significantly harm your credit score. Set up automatic payments to ensure you do not miss the due date for your credit card bill payments.

Pay in Full Whenever Possible

Although making a partial payment does not significantly impact your credit score, it will incur additional interest, which will increase your repayment costs and potentially trap you in a debt cycle.


Be Mindful of Your Credit Utilisation

Overusing your credit limit on a regular basis will increase your credit utilisation ratio and demonstrate credit-hungry behaviour to lenders. This will harm your credit score and reduce your chances of securing loans in the future.

Avoid Unnecessary Spending

It is easy to overspend just because you have a credit limit available. Spending beyond your means is a common occurrence with credit cards, which will land you in a hard-to-break debt cycle.

Consider Using Multiple Credit Cards

This can help increase your total credit limit, lower your credit utilisation ratio, and improve your credit score.

Avoid Applying for Multiple Credit Cards in s Short Span

These applications lead to a hard inquiry on your credit report. Numerous hard inquiries in a short time can harm your credit score.

Do Not Close Your Old Credit Cards

If you do, you not only reduce your total credit – increasing your credit utilization ratio – but also lose a good chunk of your credit history. Both factors, losing credit history and increasing credit utilization ratio, will harm your credit score.


Despite their negative reputation as potential debt traps, credit cards possess significant potential to assist individuals with limited credit history or average credit scores in building a robust credit history and credit score. Making wise choices in selecting the right credit card is crucial. This may involve opting for an entry-level credit card that suits your financial behaviour and needs, or a secured credit card. These steps mark the beginning of your journey towards establishing strong credit score.

Moreover, credit cards can be instrumental in improving your credit score by addressing the factors that may negatively impact it. This includes understanding the actions that harm your credit score and using credit cards to rectify them. Strategies such as managing multiple cards to lower your credit utilisation ratio and exercising responsible credit card usage can be effective. However, making timely payments, monitoring your credit utilisation ratio, exercising responsible spending habits, and keeping your existing credit cards active is important. These measures ensure you leverage credit cards to influence and enhance your credit score positively.