How many credit cards do you have? One? More than one?
Or have you already reached the state, where you keep multiple credit cards and you have no idea which one is active, which one isn’t and when is the next due date? If that’s the case, you are slowly sinking into the debt spiral that will take you down.
I know, having more than one credit card sorts out most of the things for your life. Like spending whenever you feel like, shopping without worrying about your budget, but you should know that there is a correlation between ‘credit card and credit score.’
Here are the 9 things you should know about-
1. Payment history affects 35% of your credit score
Do you know, the way you maintain your payment has a major influence on your credit score? It simply means if you have multiple credit cards and you are not regular with their payments, you are basically screwing your credit score with your own hands. 35% of your credit score depends on how you have behaved with your payments.
So, if you want a good score, be sure to make timely payments. Check more about what is a good score here.
2. The amount you owe affects 30% of your credit score
Again, when it comes to the total amount you owe to a bank, (or respective banks if you have multiple credit cards) it majorly affects your credit score. Don’t be under the impression that if you maintain one specific card correctly, that bank will be generous with you in future. Banks check your credit score before they offer you any product in future. So if you would likely be applying for loans or credit cards in near future, you can check your credit score for free here.
And that will also include the entire debt. Even the ones you have with other banks.
3. Having an old card is a boon
If you still have a credit card that you took 7 years ago, don’t throw it away. You should know that old credit cards are good for you. Just keep using it for minor things and leave the rest of its limit untouched. You might want to know how will it help you? Well, it will just allow your credit ratio to be good and in turn affect your credit score positively.
The bank won’t see you as a greedy glutton exhausting every credit card that you get your hands on.
4. Take due dates seriously
It might sound too much, but trust me you don’t want to ruin your credit score because you paid your bill one day after the due date has passed. Yes, even one-day late payment can affect your credit score. And if you have been taking your due dates casually, it’s time to stop that habit. After all, credit card and credit score goes hand in hand. If you have missed on any date in the past, your credit score would have likely been affected which you can easily check the impact of it on this website.
And you certainly don’t want to mess up the future financial products that you cannot avail because your credit score isn’t healthy.
5. Don’t entertain every credit card call you get
I know, it’s annoying when you receive 20 calls each day where some, or the other bank is offering you a credit card. And sometimes, just to make them stop calling you, you end up entertaining them by giving the details they ask for. Don’t do that. If you have a habit of passing on your information to credit card agents, you are creating a mess for yourself.
Too many applications for credit card and credit score gets hampered.
6. Don’t forget the credit card fee. EVER.
Most of you ended up availing a credit card because the agent said that there is no fee, right? Well, in most of the cards, there is a specific fee which either needs to be paid or reversed by the bank. So, the moment you start using a credit card, talk to your bank. Understand how the fee works and clear out all the doubts.
Because even if you miss out on paying the card fee, your credit score will go down and you won’t be happy about it.
7. Penal charges are also important
I hope you are aware of the penal charges. It’s basically a charge you have to pay when you are late on your payment or you haven’t paid the card fee. In case, you have a habit to miss out on due dates, make late payments and completely ignore the penal charges you are supposed to pay, let me break it to you. You are doing a mistake.
Don’t think that penal charges won’t affect your score, because it will.
8. Don’t push the limit of your credit card
There might be times when you have no other option but to swipe your card. And with that swipe, you reach the maximum limit of your credit card. It can be done once in a blue moon. But my friend, if you make it a habit to sniff out the last available funds every month from your card limit, you are posing yourself as a threat to the bank. Someone, the bank would not want to trust.
And oh, your credit score drops too, if you always exhaust your limit. To check the impact on your credit score, click here.
9. Keep yourself away from the list of defaulters
Last but not least, is making it to the list of defaulters. If you can’t handle a credit card and credit score is something you are concerned about, pay it off and close it. It might take a few months to do so, but don’t just leave it like that. If you become a defaulter you will have a stain on your credit report. It won’t allow banks to offer you any financial product and also your credit score will take a huge dip.
I am pretty sure you don’t want that.
So, that’s all about the things that link a credit card and credit score. I know, the feeling of swiping that plastic beauty is enthralling, but if you want to keep using the cards, make sure that you maintain them. Not just by paying the bill, but by using it smartly so that you can keep availing new products in the future. Because trust me, once you screw up your credit score, it takes years to get it back on track.
And that is a road, you certainly don’t want to go down on.