Ways to use your credit card right
Your credit card can be the single
most important factor in improving and increasing your credit score. On the
other hand it can also plummet your score to dark depths if you are not
careful. Think smart and use your credit cards to your advantage. Here is some
pointers on what to do and what not to do in order to achieve this reality.
1. No debts so far. Opting for a
brand new credit card for the first time.
This makes sense for your credit
score. Making use of a credit card judiciously will help you improve your
credit score. Just make sure you open your credit card with a respected and
popular brand name.
2. Opening a new credit card
account.
When you already have a couple of
credit cards, opening a brand new credit card account can cause a dip in
scores. By all means obtain a new credit card if you are not planning to get
into more debt, else think several times before opting for one.
3. Low credit limit.
Keep a tab on the credit limit of
your credit card. Open a credit card account with a company that will provide
you with the highest credit limit possible. High credit limits, even if they
are not used will add merit to your credit score and improve it.
4. Closing credit card accounts.
Even if you do not use your credit
cards, don’t rush to close them. Keep them as long as you can. If you must
close them, then do that over a period of time. Closing too many too quickly
will harm your credit score significantly.
5. Choosing the ideal credit card to
close.
The number of years you hold a
credit card account has an impact on your credit scores. Hence, let your oldest
credit card be, if you must close a card opt for the most recent cards and
close them one at a time, maybe once a month over a period of time.
6. Rotate usage of multiple credit
cards.
It is a smart move if you utilise
different credit cards for your various different expenses instead of
constantly using only one credit card for most of your purchases. Make it a
point to use each credit card you have once in six months. Some credit card
companies might even close your account if they feel you don’t use the card at
all. In such instances, it affects your credit score. To be on the safer side,
try and use every card from time to time.
7. Bargain for a lower interest rate
If you have never defaulted on a
payment for a few years, make use of your good repayment track record and speak
to the bank officials for a better bargain. Request them to lower your interest
rate citing the good track record you hold with them.
8. Request for an increase in credit
limit
You may have purchased your most
recent card because of the higher credit limit. If at a later date you wish to
close some of your cards and you know it makes better sense to close the most
recent card, you have a dilemma. The most recent card has the highest credit
limit. The oldest card has the lowest credit limit. What do you do? In such
instances, if you have a good repayment track record, approach the bank and
negotiate for a higher credit limit especially since you have been their
customer for quite a few years.
9. Keep a self imposed credit limit,
which is much lower than the actual credit limit
Never exceeding 40% of your credit
limit has a very beneficial effect on your credit score. This shows your credit
limit is high but you have not burnt it up and have plenty in reserve. This
logic helps you attain a much higher credit score.
10. Paying off credit card dues
quickly will dramatically improve your credit score.
Try not to encourage too much credit
card debt. Be wise and pay the dues quickly and keep rotating your cards.
Paying off dues will cause a spike in your credit score, which is highly
favourable.
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