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Six smart ways you can use credit card for optimum credit score

IndianMoney.com Research Team | Posted On Thursday, January 31,2019, 04:08 PM

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Six smart ways you can use credit card for optimum credit score

 

 

What is a credit score?

 Credit score is a three digit number that depicts credit worthiness. A credit score is calculated on the basis of all previous credit accounts. Having a good credit score is one of the basic criteria to get loans on good terms and conditions. Reserve Bank of India, RBI, has authorized TransUnion Cibil, Experian, Equifax and High Mark to calculate credit scores in India. All banks and financial institutions dealing with credit related transactions are mandated by RBI to share credit transactions with the four authorized credit bureaus.

What is a Good Credit score?

Credit score has a range of 300-900 with 900 being the best. Generally, credit scores of above 700 are considered good. Individuals with credit score of 700+ are eligible for unsecured loans and loans at low interest.

SEE ALSO: Why Do I Have So Many Credit Scores?

How IndianMoney helps to check the free credit score?

 Your credit score is based on all credit accounts. These credit accounts are linked with PAN. It is very important that your Credit Score is not disclosed without your consent, as it is very sensitive information. We collect PAN and mobile details only to show you the credit score. You must follow the below mentioned steps to check credit score for free:

·      Log on to https://indianmoney.com

·      Click on ‘Get free credit score now’.

·      Enter your Name, Address, Mobile Number, PAN and Date of Birth.

·      You will receive an OTP on the Mobile Number entered. Enter this OTP to validate and proceed.

·      Your Credit Score and Credit Information Report, CIR, would be displayed.

Want to know more on Credit score? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

SEE ALSO: 10 Credit Score Myths

A benefit of having a good credit score

Following are the benefits of having good credit score:

  • Swift processing of loan application: A good Credit Score means you are financially well organized. This makes banks and Financial Institutions process loan application quickly.
  • Low interest rates: You can negotiate on the interest rates with lenders as you have wide range of lenders to choose from.
  • Waiver on processing fee: You are likely to get a waiver on processing and other handling fees.
  • Better loan balance transfer opportunities: Banks and financial institutions readily approve your request for top-up loans. You can easily transfer your loan balance across lenders.

How to improve credit score?

Below mentioned are the steps to improve your Credit Score:

  • Check your Credit Score regularly: Checking your own credit score are called soft enquiries. Soft enquiries have no impact on Credit Score, so check your credit score regularly and contact CIBIL/Experian if there is any discrepancy.
  • Make timely repayments: It is critical to pay EMIs on time to get a good Credit Score. Delay in repayments, settlements and write-offs will have an adverse impact, which reduces credit score.
  • Limit your credit requests: When you apply for credit, then the lender would check your credit score. This is called hard enquiry. Multiple credit applications show you to be credit hungry and in desperate need for financial support. This would raise concerns on your financial ability and lenders would hesitate to sanction loans.
  • Limit your credit utilization: Limit your credit utilization to under 30%. For example if you have a credit card with credit limit of Rs 1 Lakh a month, try to utilize less than Rs 30,000. Maximum credit utilization shows you to be credit hungry.
  • Minimum payments: This is the minimum amount that you need to pay your lender/bank to avoid penalties. Pay total outstanding credit card dues within the billing cycle + grace period.
  • Try to avail secured loans over unsecured loans: It is good to maintain a ratio of 80:20 vis-a-vis secured vs unsecured loans. Secured loans have lower interest rates as collateral is pledged against the loan.

SEE ALSO: Credit Score Calculator

Six smart ways you can use credit card for optimum credit score

·      Choose suitable credit card: There are a lot of lenders who offer credit cards instantly. But you must analyze the terms and conditions of the card, before availing them. Availing the card just for the heck of it is not good. Choose one or two good credit cards and use wisely with timely repayments.   

·      Choose the right credit utilization limit: The lender will check your repayment ability before deciding on the credit limit. However, you must apply your own filters by considering requirements while choosing a credit card and its limit which corresponds to your income and repayment capability.

·      Plan, purchase and forecast credit card expenses: It’s good to decide on which of your monthly expenses would be made through credit card. Forecasting credit card expenses is very important to achieve financial targets. Consider whether or not to use your credit card depending on the benefits of discounts, cashbacks and reward points.

·      Opt for zero interest credit cards: A zero interest card offers no-cost EMI’s on selected large purchases of items on various online and offline marketplaces where the interest amount is discounted from the price of the order. It is easy to repay and reduce the chance of a missed payment, which thereby reduces any possibility of an impact on your credit score.

·      Check promotional emails and messages from your credit card lender: Credit card lenders announce special offers, rates and cashback, especially during festivals and public holidays in association with a few merchants. With smart planning and advance booking, you can save a lot with your credit card. Wise use of credit card helps in building a good credit history, as long as you are responsible and make timely repayments in full.

·      Pay the total due amount on time, each time: Credit card bills these days provide a 45-day repayment window. It is always a good practice to pay the total amount due, well before the requisite date. If you pay just the minimum amount or not pay at all by the due date, then interest will be charged on outstanding amounts. Considering the payment is not made within the grace period or the interest-free period (often between 45-60 days), then this interest rate can be as high as 36% a year on some credit cards.

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