These 4 Commonly-Held Credit Card Beliefs Are Hurting Your Credit Score

By Sanesh Mathew | December 13, 2018

Your Credit Card habits certainly have an influence on your Credit Score. But did you know that these commonly-held Credit Card beliefs are actually hurting your Credit Score?

Listed below are four commonly-held Credit Card beliefs that are actually hurting your Credit Score. We hope you’ll disregard them the next time you hear them.

The One About Not Getting A Credit Card

Don’t bother getting a Credit Card. Your Debit Card is more than enough.

No, no, no! Let’s be clear here. Owning a Credit Card doesn’t translate to unending debts. Of course, there are some people out there who endlessly swipe their Credit Cards. And this would lead to a lot of debt, obviously.

On the other hand, if you get yourself a Credit Card and use it wisely, then you can easily build your credit history and score. Remember that lenders check your Credit Score before they approve financial instruments like loans.

Also, unlike your Debit Card, you can enjoy discounts and rewards on all your Credit Card expenses. Plus, you can also take advantage of the EMI option for your big-ticket purchases.

Additional Reading: Your Credit Card Can Affect Your Credit Score!

The One About Not Paying Your Outstanding In Full

Carrying a balance on your Credit Card by just sticking to minimum payments every month may sound cool, but it’s really not! Not only are you damaging your Credit Score, but you are also hurting your wallet.

Most people don’t know, or rather ignore, the fact that not paying their Credit Card bills in full affects their Credit Score. Do NOT listen to such people. Paying just the minimum due can bring your Credit Score down drastically. And it will take you months (or even years) to build it up.

One last thing, please don’t utilise more than 30% (okay, at the max. 40%) of your credit limit. Credit utilisation affects your Credit Score too.

Additional Reading: All About Credit Score

The One About Sticking To Just One Credit Card

Well, this is totally your choice. If you’re content with just one Credit Card, then so be it.

However, having more than one Credit Card can actually help increase your Credit Score, provided you don’t end up maxing out all your cards. Wondering how? Well, having multiple Credit Cards increases your overall credit limit. And this, in turn, helps to keep your credit utilisation ratio below the 30% mark.

Here’s an example to help you understand this better:

A owns a Credit Card with a total limit of Rs. 80,000. He buys a brand new TV which costs Rs. 60,000.

B owns two cards – one with a limit of Rs. 1,00,000 and the other with a limit of Rs. 80,000. She buys a mobile phone that costs Rs. 70,000.

A’s credit utilisation ratio is 75%, which is way higher than the 30% limit. While B’s credit utilisation ratio is 38.8% which is slightly higher than the limit, it still is very much reasonable.

Got it?

The One About Not Accepting A Credit Card Limit Increase

Why, God, why? Of course, your lender is offering you an increase in your Credit Card limit to lure you into using your card more often. But, if you actually consider the proposition, it works in your favour too.  A higher credit limit means that you can stick to the 30% credit utilisation ratio with more credit at your disposal. And this is good for your Credit Score too.

So, forget those who tell you to not accept a credit limit increase offer and accept it blindly, at least for your Credit Score’s sake.

Additional Reading: What Can Hurt Your Credit Score?

Psst! Have you checked your Credit Score lately? It could have changed. Just click the link below to get your Experian credit report in just three minutes.

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Category: Credit Cards Credit score UCN
Sanesh Mathew

About Sanesh Mathew

A talkative sleepyhead, Sanesh, enjoys watching horror movies, listening to music, reading all things related to personal finance and wandering aimlessly (walking meditation, he calls it!). He refers to himself as a 'simple human being with a rather chaotic mind'.

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