Build healthy credit score with your credit card(s)

Posted by Namita Gad on 30 Jan, 2018

Build healthy credit score with your credit card(s)

Getting a credit card is no more a prestige or a strenuous task. However, failure to maintain a good credit score can deprive you of this worthy plastic card. Credit cards help you in delaying spends, earning rewards and more importantly building a healthy credit score. Some small tricks in a financial behaviour could yield big rewards for you in the long term.

The credit score is on a scale of 300-900. Banks or financial institutions usually consider a score of 700 & above as healthy for issuance of credit cards. This is of course subject to meeting other eligibility criteria. If you are already holding one or more credit cards in your wallet, then these financial disciplines will make your score strong.

Pay the dues by due date
Debt repayment carries the highest weightage in scoring and the same goes for credit cards too. Timely payment of credit card dues will improve your score. You can give standing instructions to your bank for ensuring timely clearance of dues.

Maintain credit utilization ratio at 30-40%
Credit utilization ratio is the proportion of credit limit utilized by you. Most financial institutions consider a ratio of 40% & above a sign of credit greediness and bureaus might cut your score on breaching this level. Check your utilization ratio on a monthly basis and try to curtail it within a limit.

Ask for a raise in credit limit
If you are frequently breaching the utilization ratio, then it would be a good idea to request for an increase in credit limit. Higher the credit limit, lower the utilization rate with the same amount of spending.

Get an additional credit card
If you wish to enjoy reward policies of some other card, then you should go for an additional one instead of increasing the limit of your existing card. Splitting up your expenses over different cards will also help you to improve the utilization ratio and hence the credit score.

Clear the dues twice a month
To maintain low balance with your credit card issuer(s) and soften the average utilization ratio, you can clear the credit card dues twice a month. This is one of the smart ways to manage the numbers game.

A Strict No to Under-utilization
You might wrongly think that not using the card at all is a better way to maintain a low utilization rate and might improve credit worthiness. Inadequate or no transactions through your card makes your file inactive for the credit bureau and thus might lead to reduction in credit score.

A well-managed credit card has multiple benefits but utilizing it in a wrong manner might cost you over the long term.