5 Smart Credit Card Moves To Build A Strong Credit Score

Credit cards are excellent tools to help you build a strong credit score. Since lenders report your card spends and repayments made to credit bureaus every month, managing your credit card smartly can help you build a healthy credit score over a period of time. What’s more, you can build your credit history using credit cards without paying any interest, if you pay your dues regularly before the due date. 

Here are some intelligent moves with your credit card that can help you build a good credit score.

Pay Your Credit Card Bills Regularly and Before Due Date

Timely repayment of credit card dues or loan EMIs is said to carry the highest weightage when it comes to calculation of credit score. So, regularly paying your credit card dues before the due date can help you build a good credit score gradually and improve your eligibility for loans/credit cards in the future.
If you find it difficult to repay your credit card bill before the due date, opt for converting the same or a portion into EMIs. Not only will this help you avoid finance charges and late payment fee on your credit card bill, it will also ensure that your credit score doesn’t get impacted. 

Credit card dues charged every billing cycle that remain unpaid usually attract finance charges between 30 per cent and 48 per cent annually (based on the existing rate). Late payment fees can be levied by credit card issuers of up to Rs 1,000 or more if the minimum amount due is not received by the payment due date. Thus, converting dues into EMIs would save cost because interest rates charged on EMIs are much lesser than the finance charges applicable on revolving credit cards. Further, through EMI conversion, cardholders can repay dues in longer tenures which helps them tide over any immediate cash flow crunch. Credit card users can also ensure they don't damage their credit scores by repaying EMIs on time. Missing or delaying EMI payments could hurt your credit score.

Keep Your Credit Utilization Ratio Under 30 Per Cent

Credit utilization ratio (CUR) is the amount of your total credit limit that you use. Credit card borrowers exceeding 30 per cent CUR are considered credit hungry by lenders and hence your credit score is lowered by a few points as soon as you cross this threshold. So, ensure that you keep your CUR below 30 per cent at all times if you don’t wish to hurt your credit score. If you find yourself crossing this mark quite frequently, you can request your lender to increase your credit limit or get another credit card. Either of these two will help lower your CUR, if you don’t increase your spends after your credit limit gets increased.

Avoid Making Multiple Enquiries With Lenders

When you apply for a loan or a credit card directly with a lender, it pulls your credit report from the credit bureau to check your creditworthiness. Such credit report requests made by the lender are known as hard enquiries and each of these gets recorded in your credit report, lowering your credit score by few points. So, if you apply for loans/credit cards with multiple lenders in a short period of time, your credit score will be severely affected.

Rather than applying to multiple lenders directly, visit online financial comparison platforms to view all your eligible loan/credit card offers. These platforms will pull your credit report only when you first visit the website to pre-qualify you for offers based on your credit score and income. This type of credit report request is called soft enquiry and your credit score won’t be affected by it.

Review Your Credit Report Frequently

Credit bureaus calculate your credit score based on the data they receive from lenders/credit card companies. This means that if there is any incorrect information in your credit report due to the lender/issuer’s error or fraudulent activities conducted in your name, your credit score can take a hit. So, the only way to detect such incorrect information is to review your credit report frequently. You can download your credit score from any of the credit bureaus for free once every year. You can also visit online financial comparison websites to view your credit report along with monthly credit score updates free of cost.

Apply For Secured Credit Card If You Don’t Qualify For A Regular Card

Several lenders do not issue credit cards to borrowers who are new to credit, i.e. borrowers who haven’t had a credit card before. Many consumers also fail to get credit cards approved due to low income, job profile, employer’s profile or living in non-serviceable areas. These consumers can apply for secured credit cards, which are issued against collateral of fixed deposits. 

Secured cards come with most of the features and benefits that a regular credit card offers. Reward points, cash back offers, discounts and interest-free period are some of the many benefits offered on these cards. Since repayments made on these cards are also reported to credit bureaus, responsible use of these cards will enable you to build a positive credit score over time.