Credit Cards, one of the most popular financial products of present times, are used extensively across a wide range of payment platforms, both online and offline. Though once considered a luxury, credit cards are now a necessity. They help you address your emergencies, needs as well as lifestyle upgradation, in a convenient manner.
In order to maximize the benefits derived from a Credit Card, you need to use it with utmost financial discipline. If used judiciously, credit cards offer an excellent opportunity to manage finance by using the interest-free credit period. However, reckless usage of these cards can lead you into a maze of spiraling debt. For a spender who is not disciplined in prompt repayments, debt can mount in accelerated proportions.
Responsible use of credit cards, helps the users in improving their credit scores. To build your credit score by judicious use of credit cards, here are some pointers on what to do and what not to do in order to achieve this.
Pay credit card dues on time:
This will dramatically improve your credit score, which further helps to build credibility for future borrowing. Payment history is a key factor in determining credit scores.
Pay the credit card bill in full:
Avoid falling into the trap of making the minimum payment. You must pay your Credit Card bills in full every month. If you only make minimum payments, not only will you have to service high-interest rate, but the lenders will consider you as credit hungry.
Monitor your Credit Utilisation Ratio (CUR):
One of the factors taken into consideration while calculating your CIBIL score is your credit utilisation ratio. It is advised that your credit utilisation ratio should be under 30%. This has a beneficial effect on your credit score. This shows your credit limit is high but you have not burnt it up and have plenty in reserve. If your CUR is above this level, it will have a negative impact on your credit score. If you have multiple Credit Cards, make sure that you spread your usage across them in such a way that the total CUR stays below 30%.
Avoid multiple credit card applications simultaneously:
Excessive credit seeking behavior may affect your score negatively. Do not randomly go for every credit card offer. Do your research and only then apply for the most useful card.
Closing credit card accounts:
The number of years you hold a credit card account has an impact on your credit scores. Closing a credit card can damage your credit score, as it can lower the average age of accounts on your credit report.
Request for hike in credit limit:
The effect of an increased credit limit on your credit score depends upon how you use your credit card. A higher credit limit can help you achieve a low credit utilization ratio, which is healthy for your credit score.
Judicious use of your credit card, would help you not only maximize the benefits of your card, but also maintain a healthy credit score, conveniently.
Credit Triangle is a one-stop solution for all your credit and finance needs. We help you with credit health management, repair and improvement.