In the last few years, the usage of credit cards has gained immense popularity amongst working professionals especially those in the early stages of their careers. The main reason behind this is flexibility in payment, cashless transactions and much more. Also, when it comes to loans, a credit card plays a crucial role in defining an individual’s creditworthiness and credit score.
However, due to irregular and not-defined spending habits, debt on credit cards leads to low credit score and well as work against those who want to borrow loans from banks. But, then there is a solution to every problem. Following some simple tricks, a credit card user can easily maintain a healthy score. Want to know? Then scroll down and read this blog:
Avoid Over-use of Credit Card
With the facility of cashless and smooth transactions, most of the individuals preferably the young ones, go for credit cards. However, you must keep in mind to avoid it’s over-usage. Using it, again and again, increases debt and if you fail to pay the amount in the next billing cycle, then the banks levy additional interest on it. Failing to do this also impacts your credit score to much extent.
For instance, it is always advised not to utilize more than 30% to 40% of your eligible credit limit as after this the credit score starts moving on the negative track. This is also known as a credit-utilization ratio which plays an important role in maintaining a good credit score.
Avoid keeping Multiple Credit Cards
Now a day’s most of the individuals own multiple credit cards considering their benefits. However, those with bad spending habits must avoid multiple card usage as this impacts credit score. For example, with multiple credit cards, you may end up using a good portion of the credit limit that can harm your score in the longer run. In the same manner, individuals with already low credit score also avoid using multiple credit score as it will lead to more debt.
Also read: Know how A Credit Mix can boost Credit Score
Not Defaulting on Monthly Payments
As said above, all the spending via credit card has to pay off in the next billing cycle. However, if you are missing it once or twice due to some accident or miss happening, then it is ok. But, if you are making this a monthly habit then it will not only increases debt but also lowers your credit score. And, that’s not it; you will also have to pay hefty late payment fees with a higher interest rate levied by the bank.
For those who mostly forget to pay credit card bills, they can avoid this by using an auto-debit facility with their bank’s net banking services. This will help in maintaining timely payments.
Avoid Withdrawing Cash from Credit Card
Yes, often amongst individuals it has been noticed that they tend to withdraw cash using their credit cards. However, it is a wrong practice as it is not only expensive but also a higher interest rate is charged from the banks on such transactions. At the same time, it also impacts the credit score adversely.
Paying the Minimum Dues
Last but not least, for those who are not capable to pay the whole credit amount in one go, it is advisable to pay the minimum due amount every month. However it is not encouraging, but then as said, something is better than nothing. It will maintain your credit score as well as creditworthiness.