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How To Use Your Credit Card For An Optimum Credit Score

Credit cards can be a life saviour when facing a financial crisis. Financially aware consumers can make the most out of their credit cards with the right usage, increasing their credit score. Overusing credit cards may lead to cyclic monthly debt. It impacts your credit score adversely if you do not make timely payments on your credit card. Apply online for a credit card considering all aspects, like bill cycles, charges, etc., to make informed purchase decisions on credit cards.

Your credit score is the key for lenders to approve/reject your loan application. Using your credit card smartly will help set good credit footprints. It suggests to lending institutions how responsibly you use credit. A high score portrays your financial reliability and allows quicker loans at lower interest rates. Therefore, an individual should maintain a good credit score. Let us find out how you can use your credit card smartly to raise your credit score:

1. Choose the Right Type of Credit Card

Banks offer several readily available credit cards to their valuable clients. The best card for you will depend on the number and type of your day-to-day expenses. For example, if it is a co-branded reward card offering discounts or cash back on your lifestyle shopping. Is it worth it for you, depending on your shopping habits? You may need a credit card offering good discounts on monthly grocery spending.

2. Keep your Old Credit Card Accounts Active

Lending institutions check for your creditworthiness and the timeline to use credit. Credit history comprises 15% of credit score. The more you use a credit card responsibly, the higher your chances of having good credit. Therefore, you need to keep your old credit card accounts active. Each time you get a new credit card and close the old one will ultimately reduce the average age of your credit accounts. Applying for credit cards just for sign-up bonuses and eventually closing them will be a negative step toward your credit score. It will impact your credit CIBIL score.

3. Aim for 30% Credit Utilisation or Less

Banks assess an individual’s repayment ability before fixing the credit limit. Even if it is high enough, avoid using the entire credit limit. Experts suggest credit card users utilise only 30% of the credit limit. Most consumers prefer using credit cards only to overcome a financial crisis. Thus, avoid over-leveraging your credit card to maintain a good credit score.

4. Pay the Full Bill on Time, Every Time

Banks provide a 45-day repayment window to pay off the entire credit card bill. If you pay the minimum due amount, the interest will be levied on the outstanding on your card. Utilise it to pay the full amount of the bill on time. If you have some pending dues that are carried forward from previous bills, clear them as soon as possible. Timely repayments increase your credit score as you are handling your debts responsibly.

5. Restrict Your Requests for New Credit Cards

Hard and soft inquiries are two types of inquiries to gauge your credit history. Soft inquiries do not affect your credit score. Credit card companies perform hard inquiries to check your credit file and determine if they can offer you credit cards. Many hard inquiries impact your credit score negatively. Many credit cards can add to your credit burden and negatively impact your credit CIBIL score. Therefore, you should apply for a limited number of cards.

6. Find Credit Cards with Zero Percent Interest Charge

With a no-cost EMI or zero-interest card, you can shop on various online marketplaces at a discounted cost. It makes repaying the credit card bill easy. It reduces the chance of a missed payment negatively impacting your credit history. While accepting the card, read the fine print carefully and ensure that there are no hidden charges or processing fees. Thus, a good credit score starts with good credit behaviour. Set a positive credit footprint with your credit card used responsibly. The time required to boost your credit score depends on why your credit CIBIL score is low. You can pay off your balances if it is low due to higher credit utilisation. It will improve your score drastically. Further, keep checking your credit report regularly to ensure everything is fine, and you will be able to get the credit easily.

Jack henry
Jack henry
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