Credit cards have changed the world of finances as we know it today. An individual can use a credit card to purchase everything from groceries to gadget. But that having said, credit cards are like water or fire to human beings, good servants but bad masters! In other words, credit cards when used judiciously can help you build and maintain a good score, but when the usage goes out of control it has the potential to destroy your score as well.
Newbies in the world of cards often tend to ask which is the best kind of card to boost score. The short answer to that there is not one particular card that will help you boost score. Boosting your score depends upon the choice of card you make according to your needs as well as the way you use it. Finally, it is all about keeping a watch over your spending patterns by checking your credit score periodically. You can do by accessing one free CIBIL report each year.
But before we proceed any further, here are some tips for credit card usage that will provide you direction.
Make a prudent choice
If you are in the process of choosing your first credit card, here are the following things you should compare, before you decide the right card for yourself.
Keep your credit utilisation low
As mentioned above, just having a high credit limit on your credit card is not enough. You must also use your card in a manner that the credit utilisation remains below 30%. This will help you increase CIBIL score. Credit utilisation is the total amount of credit you use as against the total amount made available to you.
Pay your outstanding balance in full
The one rookie mistake that most card users make is that they end up paying only the minimum amount due each billing cycle. This doesn’t let you off the hook but only enhances higher interest charges in the long run. Besides, if you keep spending on your card and paying only the minimum due amount each month, you are effectively stepping into a classic debt trap that will take much longer to pay off later. Instead get into the habit of repaying the full outstanding balance within each billing cycle each month. It’s a good idea to automate your payments so that you do not end up missing the due date for repaying your monthly outstanding.
Keep a watch on your credit report
Finally, keeping a vigil over one’s CIBIL score is an important part of maintaining a good score. You should check your CIBIL report at least twice annually to ensure that your financial health is in order. As mentioned above you can use the facility of accessing one free CIBIL report in a year to inculcate this habit of periodic checks. By checking your report regularly you will not only be assured that your credit behaviour is in order but can also ensure that there are no errors and discrepancies in your report that can be a hindrance to your borrowing needs at a later date.
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