People often suggest that any individual with a regular income should opt for a credit card to begin their credit history. It helps you take smaller loans on easy EMIs to add variety to your credit mix. The aim is to have maximum good credit on your credit history without displaying a credit hungry behavior. Now, if you do have a credit score below 750, then here is the way to build it over a period. The good news is that a low score is not permanent. A credit card is a great tool to use in times of emergencies and if used wisely, increase your
credit score.
Build your credit score with a credit card
- Choose the right type of credit card:
Banks often offer several co-branded gift cards and cards that have specific incentives. While they might appear to be very attractive at the time, do evaluate your decision. Choose the best option as per your credit card usage. Instead of increasing your exposure and going for multiple
credit cards, go for one or two of the most suitable options. Limit your credit exposure and keep your score in check regularly perform a
credit check to keep a tab on your credit score.
- Consider your credit utilisation ratio before making spends:
Multiple credit cards do give you the freedom to spend the added credit limits. But remember that you should not display credit hungry behaviour. Even if you have a higher combined credit limit, make sure that you always maintain a credit utilisation of 30%-40%. It may look like a small ratio, but it is important to take this ratio seriously. Another thing to note is having multiple credit cards requires you to be more vigilant because it opens more opportunities for fraudster to commit
identity fraud using any of your cards!
- Plan and forecast your card expenses:
Having a credit card can often push you to spend freely but it is very important to keep in mind your ability to pay back on the dues. It is always better to spend less than what you can afford to ensure timely repayment of your dues. Even before opting for easy EMIs, consider if any
consumer durable loan or personal loan would be apt. All-in-all, evaluate every decision you make with your credit card because it is all going to reflect on your
credit report. Also, keep some credit limit aside to use in case of emergencies.
- Opt for cards with 0% interest rate:
Keep a close eye on the type of interest rates offered on your credit cards. Several credit cards offer easy loans on 0% interest rates. Cards with the clause of having ‘zero percent interest rates’ don’t have any hidden charges, so there are no monthly interest rates or loan interest rates charged on them. These cards can save a lot of your money and help you build your credit score easily.
- Stay on the lookout for promotional offers on credit cards:
Banks keep putting out offers on credit cards which can be anything from shopping apparels to holiday packages especially around the holidays. Availing these offers can help you save money and create a good credit footprint so long as you make timely payments of your credit card
dues.
- Always pay the full amount due:
Banks do give you the freedom to make a minimum payment, but it is very easy to get carried away with the reduced responsibility. Once in a while, it is okay to make the minimum payment, but you must keep in mind that the pending amount due is often added to the next amount due along with penalties. In addition to that, every month there is an additional amount to be paid back which will keep increasing every time you choose to pay the minimum amount. Paying the complete amount due each month adds creditworthiness and responsible borrowers to your
credit information report analysis.
To build a healthy credit portfolio, it is important to inculcate good credit practices, even if you consider using credit cards. This will reflect positively on your credit report. Every borrower must keep in mind that to build a positive credit footprint. To know which of the above ways you must implement to have a good credit report, you can start by checking your CRIF
Personal Credit Score with
CRIF Solutions India.
