Do You Use Your Credit Card Frequently? Learn How Every Transaction Affects Your Loan Eligibility!

Credit cards have come a long way in India — from being a premium financial product available mainly in big cities, to now being widely used across Tier 2 and Tier 3 towns. In fact, the numbers speak for themselves. As of May 2025, India had approximately 111 million active credit cards — almost double the number from 2019.

This growth isn’t just in card ownership. People are also spending more. In May 2025 alone, Indians spent about ₹1.89 lakh crore using credit cards, which is a 14.5% jump compared to the same month last year. Digital payment adoption, rising income levels, and user-friendly tech upgrades are fueling this rise in both usage and acceptance.

But here’s the catch — how you use your credit card can seriously impact your chances of getting a loan. Every swipe and every missed payment doesn’t just stay on your bill — it shows up in your credit history and can either help or hurt your future financial options.

How Credit Card Usage Affects Your Loan Approval

Your credit card habits directly influence your credit score, which banks and lenders rely on heavily to approve loans. Here’s how different behaviors can affect your creditworthiness:

Paying your credit card bill in full and on time: This reflects positively in your credit report and helps improve your score.

Delays or defaults in payments: These lower your score and make lenders hesitant to approve your loans.

Paying only the minimum amount due each month: May indicate to banks that you’re financially stretched, which can reduce your chances of loan approval.

What is Credit Utilization Ratio? Why It Matters

Your credit utilization ratio shows how much of your credit limit you’re using. It plays a major role in determining your credit score.

If your total credit limit is ₹1,00,000, try to stay well below ₹30,000 in usage.

Here’s how banks usually interpret your credit usage:

0% – 30% usage: Seen as responsible usage; safe zone.

31% – 50% usage: Slight concern; may indicate increasing dependency on credit.

Above 50% usage: Red flag; high risk of loan rejection.

6 Smart Tips to Improve Your Credit Score

Want to keep your score healthy and increase your chances of getting better loan offers? Try following these practical tips:

Always pay your bills before the due date – This keeps your score intact and avoids penalties.

Use less than 30% of your credit limit – Lenders prefer borrowers who don’t rely heavily on credit.

Avoid carrying large unpaid balances – Keeps your repayment capacity looking strong to banks.

Check your credit report regularly – Catch and fix any errors that might hurt your score.

Enable auto-pay for your credit card bills – This ensures you never miss a payment date.

Stay in touch with your bank’s customer care – You’ll be informed about any new policies, changes, or offers that could help you manage your credit better.

What’s New in Credit Reporting?

The Reserve Bank of India (RBI) has rolled out new rules in 2025 to make credit reporting faster, clearer, and more secure:

Banks must update your credit data every 15 days, so your credit score changes reflect more quickly.

All charges and penalties must be fully disclosed, making it easier to understand what you’re being charged.

Your credit card data must now be securely stored using tokenization, adding a layer of safety to your personal information.

No credit card can be issued without your consent, putting more power in the hands of customers.