Choosing a credit card wisely is one of the best ways to improve your credit score. The following steps tips by Andromeda Loans, one of the largest loan distributors in India will guide you in the right direction.
1. Using Your Credit Card To Build Your Credit History
Building a credit history with a credit card is the best way to do so without incurring the cost. With credit cards, you are not subject to interest costs as long as you pay off your outstanding balance in full or do not opt for EMIs or loans. The benefits of credit cards go beyond zero-cost financing. You can earn reward points, earn cash back, and get discounts, among other things.
2. Paying Monthly Bills By Due Date
Transactions on credit cards are reported to the major credit bureaus for the purposes of calculating/updating credit scores. Credit scores can be reduced by defaults and delays, but increasing them can be achieved by consistently paying all bills on time.
3. Avoiding Multiple Applications For Credit Card Within Short Span
In order to assess your creditworthiness, credit card companies obtain your credit report from the credit bureaus. You will see these on your credit report as hard inquiries, which will reduce your credit score by a few points each.
4. Closing Your Previous Credit Card With Utmost Care
While calculating your credit score, credit bureaus take into account the average age of your credit facilities. You will reduce your credit score if you close your older credit cards as well, as borrowers will reduce the average length of your credit facilities.
5. Maintaining Credit Utilization Ratio Below 30%
You can calculate this ratio by dividing your credit limit by the amount you have used. There is usually a preference for lenders to lend to those with a credit utilization ratio of less than 30%. Credit-hungry applicants are considered riskier to lend for this reason.
6. Keeping & Using One Credit Card In Your Name At Least
You need a credit history to build a credit score. The use of joint cards is often convenient for married couples. Without a credit history in your own name, you would not be able to access credit.
7. Keeping Your Credit Card For Longer Periods
15 percent of your credit score is based on how long you’ve had your credit accounts, so holding credit cards for a long time is beneficial. Ensure your rewards points are valuable to your lifestyle and ensure the annual fee is affordable when selecting your credit cards.
8. Monitoring & Freezing Your Credit Card
It is important to freeze your credit to prevent credit card or loan fraudsters from targeting your credit score. Online credit freezing is the best option.
9. Using Your Credit Cards Often, Not Too Often
For those who use their credit card for everything, ask your credit card company once a year to raise your credit limit so you have more flexibility. Your credit score is also improved by higher credit limits.
10. Keep Old Credit Card Accounts Active
Sign-up bonuses may prove useless if you use your credit cards for a while and then close them. If you want to find a card that meets your expectations, shuffle between them and retain the one that meets your expectations.