Your credit score plays an important role in determining your creditworthiness and thereby your access to credit. Lenders look at your credit score to understand your repayment behavior and likelihood of default. Fast and affordable credits are easy to get if you have a good score. On the other hand, a low score could result in delayed loan approvals or higher interest rates. Therefore, maintaining a high credit score is essential to easily obtain affordable credit. Credit cards are also an important factor, as your credit score is influenced by all types of credit facilities available. This article details how to use credit cards to improve your credit score.
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How can I use my credit card to improve my credit score?
Here are five tips for using credit cards to improve your credit score.
#1 – Choose the Right Credit Card
Most issuers offer two types of cards: secured cards and non-secured cards. A secure credit card is a card that can be redeemed by providing the issuer’s collateral (usually his FD). Unsecured cards, on the other hand, are available without collateral but require a high credit score.
So if you don’t have the ideal score, you should resort to secure credit cards. This is because the issuing company may reject your application if you do not meet the requirements, which can negatively affect your credit score.
You should also review and compare cards and understand their terms and conditions. This will help you avoid being blinded by high costs and know which cards offer the most favorable conditions.
#2 – Use Cards to Pay Bills
If you have a credit card, it is wise to use it instead of paying with cash. When you use a credit card, you are using short-term credit. This helps build your credit history, which is an important aspect of your credit score.
Show that you can manage different types of credits without any problem and your score will improve. So use your credit card as much as possible and build your history to get a good score.
However, be careful not to overuse your credit card. Instead, use it on a budget so that you can pay your credit card bills on time.
#3 – Pay Your Credit Card Fees On Time
Using credit cards is just one aspect of building a credit score. The other is to pay your dues in full and on time. Your repayment history has the biggest impact on your score. Therefore, it is important to keep records clean.
Set reminders and instructions so you don’t miss your credit card billing deadline. If you cannot pay the full amount, please pay the minimum amount. However, be careful not to get into the habit of paying only the minimum amount.
This is because it can negatively impact your credit score and cause financial stress due to high interest rates from late payments. In addition, cumulative dues can put you in a debt trap, which has a negative financial impact.
Also read: How can Credit Card Simulator help improve my credit score?
#4 – Limit Your Usage
Finding balance is important in virtually every aspect, including the amount of credits you use. Therefore, it is important not to overuse your credit limit.maximize your potential credit card It can indicate an over-reliance on credit and an inability to manage finances.
Both of these affect your credit score and thereby your creditworthiness. Ideally, you should keep your utilization under 30% of your total limit. You can set alerts before you use your card or manually estimate your usage so you’re always under your limit.
Remember that improving your credit score takes patience and consistency. So don’t hesitate to use and pay back. Now that you know how to use your credit card to boost your credit score and creditworthiness, get the Bajaj Markets app.
With this one-stop financial service, you can not only check your credit score for free, but also apply for the best credit cards from reputable banks. Compare the functions and fees of various credit cards and easily apply online from your smartphone! Download the app today from the Play Store or App Store and get a credit card in just a few clicks.