Credit cards make our lives comfortable and easier. When you are going on a long vacation or for a business trip overseas, you don’t need to carry a lot of cash with you as long as you have a credit card. However, did you know that you can use a secured credit card for improving your credit score?
Believe it or not, using credit cards is easily one of the best options for a bad credit fix. They are easy to get, use, and build high credit score with. However, you must use them wisely, otherwise, you can even damage your score instead.
The following are some of the best tips for using credit cards for bad credit fix:
Since you want to improve credit score, you must show that you are a responsible credit user. This can easily be done by using your credit card for a few purchases every month. So, do not take out your credit card for every single thing you want to buy. Instead, try to spend only 30% to 35% of the credit available to you. For the majority of your expenses use cash instead.
Did you know that there are some big drawbacks of making minimum payments for your credit card bills? Banks try to attract new customers by offering minimum payments, but in truth, these “minimum payments” attract high annual interest and increase your debt. Thus, by sticking with these not only you will have a high debt but you will also damage your credit score in the process.
To ensure your credit report stays healthy and your score improves, make sure you pay at least more than the minimum, if not in full. Also, always make your payments on time. Even a single late payment can affect your credit score badly, and in your efforts towards bad credit fix, you really can’t take any chances.
Most smart credit users know the important of auto-deduction. It’s a system, when enabled by you, allows your bank to automatically deduct the payments for your monthly credit card bills when the time comes. This way, you don’t have to keep track of your bills and payments, and your credit score will improve gradually.
If you want your credit score to remain safe then you can’t close your credit cards or even bank accounts on a whim or convenience. While ideally you are allowed to open or close any credit card account whenever you wish, it can be detrimental to your score if you are not careful.
The reason why you should be careful with opening or closing your credit card accounts is that they contribute to your credit score. For instance, if you have an old credit card that you have been using for several years and paying bills on time for the same, then it’s likely it has made a great contribution towards your credit score. So, if you will close this account then it will immediately impact your score negatively.
Another reason why credit cards should be cancelled with care is because they also often balance your credit utilization. Let’s consider an example. Say, you have three credit cards with Rs. 50,000 limit on each, and you spend about Rs. 15,000 using each every month, thereby making your total usage about Rs. 45,000. Now, say you close one of these cards but keep your utilization the same. This will increase your credit utilization on each card by about 40% to 45% which is bad for your credit score.
Secured cards are excellent for the people who have a bad credit and can’t get unsecured/traditional credit cards. This is because it’s easy to get a secured card even with a bad credit, as you have to deposit an amount for security purposes.
By using your secured credit card responsibly, you can certainly improve your credit score. However, bear in mind that you may not get the desired results soon. So, be patient and let your card do its job. With time you will certainly see improvements.
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