How Credit Card Users Can Maintain A Healthy Credit Score

By | November 19, 2020

Your Credit Card usage habits is instrumental in defining your credit health and determining your Credit Score. Here’s how you can maintain a healthy Credit Score as a Credit Card user.

How Credit Card Users Can Maintain A Healthy Credit Score

If you are a Credit Card user, then this article is for you. Why, you must be wondering? Well, let’s just say that your Credit Card usage habits is instrumental in defining your credit health and determining your Credit Score. That being the case, bad Credit Card habits have a negative effect on your Credit Score and overall credit health.

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Credit Cards as a financial instrument gained popularity among the Indian masses, of late. One can attribute the sudden popularity of Credit Cards to heightened exposure towards banking-related products and cashless transactions in the recent times. While this is a good thing, it is also seen that most Indians, being relatively new to Credit Cards, are quite aggressive in the way they use the product. What they fail to realise is that misuse of their Credit Cards has its own risks especially with regards to their credit health.

But this isn’t something that should be a matter of worry. We’ve identified a few simple tricks that can help you maintain a healthy Credit Score while using a Credit Card.

Additional Reading: 5 Immediate Steps To Take If You’re Deep In Credit Card Debt

Overusing your Credit Card is not good for your credit health.

If you hold a Credit Card, you must be aware that there is a credit limit attached to your card. This limit is basically the total amount of money that you can borrow from your lender using your card. While you are eligible to use the entire limit, it is, however, recommended by lending banks that you do NOT utilise more than 30% to 40% of your eligible credit limit as this can affect your Credit Score negatively. Credit bureaus consider your credit utilisation while determining your Credit Score. And, of course, they give a higher score to those who have maintained their credit utilisation within the 30 to 40% range.

Multiple Credit Cards aren’t for everyone.

For starters, let us make it clear that we’re all for using multiple Credit Cards, taking into consideration the different benefits that different cards provide. However, if you are someone who tend to go overboard with Credit Cards or someone with a low Credit Score, then we’d advise against owning multiple cards. Let us further explain why these two customer types should stay away from multiple Credit Cards:

Someone who goes overboard with Credit Cards – With multiple cards, you’ll end up using a good portion of the limit on each of your cards. And, therefore, your debt will keep building up. And this can harm your score in the long run.

Someone with a low Credit Score – Multiple Credit Cards mean more debts to repay every month. Now, considering your already-low Credit Score, we can assume that you haven’t been doing well with your finances. So, how are you going to clear your dues without fail every month? Hence, it is better that you stay away from Credit Cards till you get your Credit Score and your finances sorted.

Additional Reading: Tips and Tricks For Handling Multiple Credit Cards

Monthly payment defaults aren’t acceptable.

Okay, you can get away with a default or a late payment once or twice, but provided you have a valid reason. Otherwise, missing a payment or making a late payment is total financial hara-kiri since these have the ability to ruin your credit health. And it doesn’t end there. You’ll also have to shell out a good amount of money as late payment charges and even pay higher interest just for not making timely payments. Not worth it, right?

If you keep missing making payments on time because you’re forgetful, then here’s a simple solution – auto-debit facility. Set up instructions for auto-debit with your bank’s netbanking and you wouldn’t have to worry about making timely payments ever again.

Not paying the minimum due amount? Bad!

Usually we do not even encourage minimum payments, rather we’d ask you to make full payments every month. However, we understand that sometimes you can only make the minimum payment as you’d have had other commitments. But if you’re the type who pays even lesser than the minimum amount due, then it’s time you stop as this credit behaviour of yours is affecting your credit health negatively. Ensure that you always pay at least the minimum amount due on your Credit Cards without fail.

Withdrawing cash using your Credit Card isn’t wise.

It’s expensive! Yes, withdrawing cash using your Credit Card is super expensive as the interest rate charged on such withdrawals is way higher than that charged on using your card for online or direct purchases. And that’s not all. Lending institutions and credit bureaus do not consider this act as a positive one, so it can adversely affect your credit health.

Additional Reading: Become Financially Independent With A Credit Card!

By the way, have you checked your Credit Score lately? It may have changed. Click the link below to get your Credit Score for FREE and in just three minutes.

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