If you have a credit card and you continue to use it, then you should know how credit card usage affects your credit score. Credit bureaus consider the ratio of your credit card repayment and credit card usage to be an important factor when determining your credit score. Meaning that using credit cards well such as not exceeding the prescribed limit, paying on time, etc. has a positive effect on your credit score. Conversely, if you use a credit card excessively and are unable to pay on time, it has a negative effect on your credit score. So through this post we are going to tell you some tricks here, which will help you in maintaining a good credit score.
It is not good to use credit card excessively
Credit cardholders can obtain credit only through a credit card up to a certain limit. This limit is pre-decided by banks. This limit is called the ‘credit usage limit’. Credit cardholders can use the credit card only up to this limit. The bank is not allowed to use more than this amount. You can use a credit card up to a fixed limit in a month, but you should avoid using a credit card to the maximum limit. The responsible credit card user is the one who uses only 30 to 40% of his credit limit. No more credit cards should be used. It can have a negative effect on your credit score if you use it to or above the credit limit. Your credit score is calculated based on your credit utilization ratio. If you use your credit card within this limit and keep it, then your credit score will have a positive effect and will help to keep it good.
Do not have more than one credit card
There is no harm in having more than one bank card due to discounts and other benefits available on the credit cards of different banks, but if you are unable to stop yourself from spending and spend more than the limit and your credit If the score is low, you should avoid using multiple credit cards. Let’s try to understand why those spending more than the limit and those with low credit score should use the same credit card –
- Individuals holding multiple credit cards – Having multiple credit cards means that you can use a fair portion of each card’s credit limit. In such a situation, you will need more money to pay the debts of all your cards. If you are unable to repay this money for any reason in a month, then you will get a loan, which will attract interest as well as your credit score can be affected badly.
- Individuals with a low credit score – A low credit score means that your position is not good in terms of debts and liabilities. So in this situation, you should avoid using your credit card until your credit score is good.
Pay on time every month
If you miss paying your credit card on time, it is not good for your credit score. You can save your credibility by giving a valid reason once or twice, but if this lapse continues continuously, your score will have a very negative effect. If you pay the credit card after the due date, you may have to deposit more than the fixed amount. In addition, you may also have to pay interest at a higher rate. If you often forget the due dates of payment, you can choose the Auto-Debit option. By using this you can make regular payment of credit card easily.
Pay at least the minimum amount due
At the end of the month, it is better to pay the credit card in full. You will not have to pay an additional amount as interest. However, sometimes you may miss paying a credit card for various reasons such as personal payments or family obligations. But in this situation, if you pay less than the minimum amount, you should take it seriously, because this negligence has a negative effect on your credit score. You can save your money, known as interest, by paying a minimum or full amount each month. If you repay your credit card debt on time, you can save money and also improve your credit score.
It is not right to withdraw cash using a credit card
Always remember that credit cards should be used for cash in advance’ and not for withdrawing cash. Withdrawing cash using a credit card is very expensive and the rate of interest charged on such withdrawals is much higher than in advance cash. It also has a negative effect on your credit score.
