Maintaining a Credit card is a tricky business and a small dent would make huge damage to your Credit Health. To maintain a good credit score, here are the 5 proven ways to keep you right on the financial track.
It is a well-known fact that good Credit Health is required to credit card users, loan seeks and people looking to establish a line of credit. Banks in addition to income, also go through various credit reports such as CIBIL, Experian, etc to understand the applicant’s past behaviors related to loans and repayments. Credit Cards are gaining tract over the last decade and are the best financial instruments to build your credit line.
However, there are findings that Indians are aggressive in terms of using a credit card. One thing to be noted by all users is that the number of usages in terms of value and transactions is instrumental in determining the credit score. Irresponsive usage of Credit cards has a very big impact on a card holder’s credibility to avail any loans in the future. t is very important to maintain a high credit score to avail loan benefits.
Do not default on monthly payments
A Credit card is like an unsecured loan that looks good if you pay within the due date. If not, it can turn evil. Every advisor recommends not to go over the due dates. If skipped, it results in higher interest rates and penalties. Not just penalty, it would also take a toll on your credit score affecting the future possibilities. This issue usually can be resolved by ensuring that you maintain a balance of income in proportion to your spending and make timely payment on the outstanding amounts.
Do not pay less than minimum
Credit Card users are needed to pay their due either in full or a minimum amount. If you fail to do so, you can be sure to take hits on your credit score. To avoid this problem, always check your bill thoroughly and make either full payment or any amount above the minimum due before the due date.
Do Not Overuse
Having a Credit card doesn’t mean it can be used as and when you need it. Every Credit Card company or a banker has a limit on the card’s usage based on the repayment capability of the user. Make sure that you always utilize at least 30% lesser than your limit. This is a general recommendation and not a mandate but it is advisable to keep the usage in control.
Do Not Cash it out
Credit Cards were/are never meant for cashing out. But, the users always find to be in a fix when they are in urgent need of cash. This is probably the most critical point out of this list of things that one must do to maintain a healthy credit score while using a credit card. Using Credit Card for withdrawal is an expensive affair. Withdrawing cash using credit cards is not considered to be a positive action by banks and credit bureaus, therefore, you should refrain from doing so to maintain a good credit score.
Avoid Multiple Credit Cards
Maintaining multiple credit cards is not advisable if your credit score is low. In order to maintain a healthy credit score, you should refrain from having more than one credit card. If you are spending through all your credit cards, the pressure of debt will keep building and end up harming your credit score significantly.
It is often advised to have two credit cards to maintain a balance, but if you have a low credit score or you are struggling to repay the bill, then it becomes very tricky to maintain the cycle. If the balance is not maintained, the debt accumulation will affect your credit score adversely.