In today's world, credit cards have become an essential financial tool for many individuals in India. They offer convenience and flexibility in making purchases, along with the ability to manage finances effectively. However, it is crucial to understand the implications of exhausting your credit card limit frequently, as it can significantly impact your credit score. In this article, we will delve into what credit scores are, how they are calculated, the key factors that influence them, and how to maintain healthy credit scores in the Indian context.

Your credit score is a numerical three-digit representation of your creditworthiness. It reflects your ability to manage credit responsibly and acts as a crucial factor considered by lenders when you apply for loans, credit cards, or other forms of credit. A higher credit score indicates a lower risk to lenders, increasing your chances of being approved for credit and obtaining favorable terms.

Credit scores in India are typically calculated by credit bureaus such as CIBIL (Credit Information Bureau India Limited), Equifax, Experian, and CRIF High Mark. While each bureau may have its own specific scoring model, the factors influencing credit scores remain relatively consistent.

Factors involved in calculation of credit scores

  1. Payment History: One of the most critical factors in determining the credit score is Payment History. It reflects your track record of making timely payments on credit accounts, such as loans, credit cards, and utility bills. Consistently making payments on time enhances your credit score, while late payments or defaults can significantly damage it.
  2. Credit Utilization Ratio: This ratio compares the amount of credit you are using to the total credit available to you. It is calculated by dividing your total credit card balances by your total credit limits. A high credit utilization ratio suggests a heavy reliance on credit and can negatively impact your credit score. Experts generally recommend keeping your credit utilization below 30% to maintain a healthy credit score.
  3. Credit History Length: The length of your credit history is an important factor in assessing your creditworthiness. It takes into account the age of your credit accounts, including credit cards, loans, and mortgages. A longer credit history demonstrates a track record of responsible credit management and can positively influence your credit score.
  4. Credit Mix: Lenders prefer borrowers who have experience managing different types of credit accounts. Having a mix of secured and unsecured credit, such as credit cards, personal loans, and home loans or other collateral-based loans, can indicate responsible credit behaviour. However, it is essential to maintain a balance and only acquire credit that you can manage effectively.
  5. New Credit Inquiries: Whenever you apply for new credit, a hard inquiry is generated on your credit report. Multiple inquiries within a short period can negatively impact your credit score, as it may suggest a higher risk of financial instability or desperate need for credit.

How to maintain healthy credit scores

  1. Pay Your Bills on Time: Consistently making timely payments on your credit accounts is crucial for maintaining a healthy credit score. Set up reminders or automate payments to ensure you don't miss any due dates.
  2. Monitor Your Credit Utilization: Keep a close eye on your credit card balances and aim to keep your credit utilization ratio below 30%. If you find yourself frequently reaching or exceeding your credit limit, consider increasing your credit limit or using multiple credit cards wisely to distribute your spending.
  3. Maintain a Diverse Credit Mix: Having a mix of secured and unsecured credit, such as credit cards, personal loans, and collateral based loans, can demonstrate your ability to manage different types of credit. However, avoid acquiring unnecessary credit or taking on more credit than you can handle responsibly.
  4. Limit New Credit Applications: Be cautious when applying for new credit, as multiple inquiries within a short period can negatively impact your credit score. Apply for credit – new loan or credit card only when it is necessary and do a thorough research to find the best options available.
  5. Regularly Check Your Credit Report: Monitor your credit report for any errors or discrepancies that could affect your credit score. If you spot any inaccuracies, promptly notify the credit bureau to have them rectified.
  6. Seek Professional Guidance: If you are struggling with credit management or have concerns about your credit score, consider seeking advice from a financial professional. They can provide personalized guidance and help you develop strategies to improve and maintain a healthy credit score.


Frequently exhausting your credit card limit can have a significant impact on your credit score in the Indian context. It is vital to understand how credit scores are calculated, the key factors that influence them, and the steps you can take to maintain a healthy credit score. By practicing responsible credit management, such as making timely payments, keeping your credit utilization low, maintaining a diverse credit mix, and limiting new credit applications, you can protect your creditworthiness and open doors to better financial opportunities in the future.