A credit card offers us a great opportunity to build credit, pay expenses and spend at our comfort and ease. Unlike a debit card, credit has some slight connection to your credit score and reputation. As you use your credit card day by day, you are either accruing points or removing points from your credit score. A credit score is a major factor that contributes to determining your access to credit cards and other credit facilities. Some of these things are minor things we take for granted and never thought would by any means affect our credit score.
A credit card is an amazing asset in the hands of someone that understands how it works. When used properly, it can be a great tool. But when misused, it can be a major snag that will dent your credit profile, thus preventing you from accessing good credit facilities. Just like the casino, there are a few tips that can help you succeed. Read on to discover the little things you can do differently to maintain and improve your credit score. Some of these tips are not difficult to imbibe once you understand them.
Do you want to have a good credit score? Never miss any payment and pay early, even before the due date. Avoid missing payments, as this can hurt your score immensely. Likewise, avoid late payment, as this is a bad indicator of a bad debtor. A 30-day delayed payment can drop as high as 83 points from your credit score. You can experience a massive drop of 133 points from your credit score for a 90-day missed payment. In addition to the drop in score, you will also incur late payment charges. To avoid this issue, set up an auto payment plan on your account. You can also set reminders and notifications to ensure you don’t forget the due date.
Do not max out your credit card limit
If you need a higher credit card limit, apply for but never max out your credit card balance. Using all the credit available increases your utilization rate. A high utilization rate will damage your reputation as a debtor. If you are often maxing or very close to maxing your limit every month and you can comfortably pay off every month, then that’s a sign you need an increased limit. Talk with your credit card company representative about the option to increase your limits.
Carryover balance between months
Carrying over credit card balances and improving credit scores is one of the biggest myths in the finance world. So many believe that practice improves credit scores, which is a fallacy. In an actual sense, carrying the balance month to month incurs a cost for you and hurts and negates your credit score. The practice makes you have higher utilization of credit. In simple terms, you are simply increasing your amount of debt when compared to the credit available. Ideally, a lower credit utilization rate is better for you. So, remember this when using your credit card. Also, remember the bank charges that go with credit carry over.
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Frequent application of credit cards
A new inquiry goes to your credit report each time you apply for a card. Frequent application means more inquiries. More inquiries are a red flag. It appears to the credit card company as a sign of someone desperate. Lenders do not like people who are desperate for credit. Do not apply for a credit card more than once in a space of six months. You can do a pre-qualification check to ensure eligibility before the main application. This will reduce your chances of rejection. Also, make sure you have complete paperwork and avoid falsehood or erroneous information.
Not taking part in electoral processes
The electoral process is one of the ways the credit company verifies the details of many credit card applicants. When you participate in electoral processes, you help to create an accurate database of your information, which many credit companies can access when you apply for a credit card. For you to participate in an electoral process, your bio data is accessed and verified, which is very useful for your profile. So, if you want a better credit profile, participate in the electoral process in your location.
Closing a credit card
Unknowing to many, closing a credit card can mess up your credit score. When you close a card, the credit history is affected adversely. Closing an old credit card and a new one can drastically reduce your history to the average age of the two cards. This is a wrong move that makes you lose years of good history. You need to think about it carefully before closing an old card. Nevertheless, there is always a need to close an old credit card. Decide it carefully.
With the few points outlined, you can have a better credit profile now.