Do you think that getting a credit card will profile your credit score to goodness?
If so, then you are right and – you are not right.
When you apply for a new credit card, it initially lowers your credit score as the lender exercises a hard pull in determining whether you should be approved for your credit card application or not. On the other hand, getting a new credit card paves a way for credit utilization and helps you in the future if you use it for the long term and make regular payments.
So, what is the best way to improve your credit score with a credit card? Let’s learn all about that in this article!
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How to Improve Your Credit Score Using a Credit Card?
One of the most effective and probably the best way to improve credit score is to carry a credit card and not to mention – be mindful with the way you use it. You can attain this goal by paying credit card bills on time every month and trying to maintain a low balance. This will assist you in strengthening your credit score.
Ways to Improve Credit Score with Credit Card
Below mentioned are some points that will help you build a good credit score with a credit card-
1. Choose a card that blends well with your financial habits
Perform all the research you can before you apply for a credit card. You need to keep in mind your financial requirements and whatever that you expect from a credit card. It is the best way to improve credit score using a credit card. Doing this will help you compare the options available for cards and you will be able to understand which suits your needs. Many fintech companies and lenders provide a comparison of the different credit card offers on their portals which you go through in order to find yourself the best one.
2. Don’t Miss the Due Date
Not that you don’t already know this but here’s a little tip to improve your CIBIL with a credit card – pay your bills on time!
Missing the due date for credit card bill payments or being inconsistent with the payments is perhaps the worst idea to act upon. Know that sincere payment history is most important for you in order to welcome credit approvals or credit limit increases easily in the future. So, you have to make sure that you are making your credit card payment on time.
3. Pay in Full
Are you living by the payments of minimum dues on your credit card? If so, then try to transform this regime into full payments. Paying the minimum due can take your credit score to good standing, but it is not going to resist the hefty interest that comes along with the statement every month. When you pay in the amount full, you not only ensure an attractive credit score but also save yourself from charges. After all, you won’t like to pay for more than the amount you ever used.
4. Avoid Using Your Credit Card Limit Excessively
You have to be very mindful of your credit card utilization ratio if you’d really like to improve your credit score. This ratio depicts the link between the amount of credit you are offered for using and the amount of credit you are actually using. The ratio is the balance that you have on your credit card with respect to the credit spending limit. If you are utilizing more than 30% of your credit line then you are risking your score to ruins. So, do not spend more than you need even if your credit line is available by all means.
5. Monitor Your Credit Score Regularly
It is imperative to keep your eyes wide open to your credit score as well as your credit report from time to time. Doing this helps you make sure that things are in good shape. Checking credit reports regularly helps you to detect errors in them if there are any. You can raise your concern in this regard and bring your credit score to a sound level.
Other Ways to Improve Your Credit Score
Apart from being sincere with your credit card activities, you can use the following tips to improve your CIBIL-
1. Pay Your Dues Religiously
The foremost way to shape your CIBIL in a competent way is none other than the timely payment of the billed amount. If you have been missing the repayment date or avoiding paying credit card bills lately then wake up – it is time for you to make things put together and level up your bill payment regime. You can use reminders for due dates and be devoted to the habit of payment. When you are good at settling the score of outstanding debt, you begin to notice a significant impact on your CIBIL score. Delayed payments for EMIs or credit card bills will only serve you with the penalty, hefty charges and will burn a bigger hole in your pocket. The best way to pay your dues on time? Automate the repayment and be relaxed about things.
2. Avoid Excessive Debt
Don’t do it unless it is unavoidable. Too much debt is equivalent to a stubborn financial woe. If you are really willing to improve your credit score, then you need to stop using much of the credit facilities. Stop applying for multiple loans at the same time. To prevent your CIBIL from crashing, you can repay your existing loans before applying for another. Multiple loans at the same time show that you are stuck in a vicious cycle of debt with insufficient finance in your pocket. It is only going to low-grade your credit score.
3. Have a Healthy Mix of Loans
Know that multiple unsecured loans can decrease your credit score. Keeping up with the right mix of secured and unsecured loans helps shape a decent credit score, whether the loans are short term or long term.
4. Keep Tabs on Your Co-signed and Joint Accounts
While you are on a run to improve your credit score, don’t forget to keep an eye on your guaranteed, co-signed and joint accounts every month. Since you are equally liable in guaranteed, co-signed and joint accounts, missed payments can ruin your credit score. It is best that you do not become a guarantor or a joint account holder of loans.
5. Evaluate Your Credit History Monthly and Yearly
To improve your CIBIL score, it is recommended that you monitor the score and report regularly and see if there is anything left amiss. This will help you know if you are on the right track and budget finances to tackle inconsistencies if any.
6. Budget Well
When you have repayments to deal with, the best idea is to be proactive while budgeting. Prioritizing repayment and clearing billed dues is an ideal way to have a good history. While a debt eventually becomes your platform to have a good credit history, it is essential to have the right one and be prudent with its payments.
How to Have a Credit Score Without a Credit Card?
Are you searching for ways to create a credit score when you don’t have a credit card? Well, the best way to build a credit score, in this case, is to sign up as an authorized user. If you become an authorized user on someone’s account, you receive a credit card linked with that individual’s account. It means that you can make purchases from their credit limit. While the account holder is liable to make payments, the account information reflects on your credit report as well.
Final Thoughts
So, that was everything you needed to know about building a credit score using a credit card. On the surface, all you need to do is be on good terms with the payments and utilization of a credit limit. Your credit card can help maintain your credit score in good health if only you know how to approach it smartly.
Frequently Asked Questions (FAQs)
Do frequent inquiries affect credit score?
Frequent inquiries about credit score give an impression about you being greedy about the credit facilities and thus, credit score faces a slight drop. To have a good credit score, you should avoid checking the score frequently.
How do I improve my credit score with a credit card?
You can use your credit card for paying utility bills and day-to-day expenses that are much lower than ones incurred by the purchase of material goods. Small credit card bills are easier to pay and can help you boost your credit score. The best way to improve your credit score with your credit card is the timely payment of dues.
How can I build credit without a credit card?
If you don’t have a credit card and you want to build credit then you can become an authorised user of someone else’s credit card. You can use their credit limit to make purchases. In this case, the primary cardholder is responsible for the payment of credit card bills but the information is visible on your credit report which can help you a bit with building credit.
