It is important to have a good personal credit score in India or anywhere else in the world, as it creates a mark upon your financial standing. Credit score is calculated by looking at your credit history, which includes your credit card payments and loans.

Banks and lenders use your credit score to determine your eligibility for loans, mortgages, credit cards, automobile loans, and to calculate your rate of interest for these loans. Financial firms such as Bajaj Finserv offer home loans with an interest rate of 9.85%, only if you have a good credit score. The problem you might not even realise is that your credit card is hurting your credit scores.

Excessive Loans

Credit cards might seem like answer to your prayers in an emergency situation, but before you could apply for more than one, think again. If you have taken a number of loans, like an automobile loan, a home loan, and a personal loan, and also have a bunch of credit cards, you are can be in serious debt-trouble. This can cause an effect of payment defaults on credit scores. Banks and lenders assess your bank statements before lending you funds. So knowing your poor credit score is a serious problem and lenders will reject you for this.

Not Paying When There is an Issue

When there is an issue with the credit, whether it’s a double swipe or an accidental extra entry, you naturally assume that you wouldn’t have to pay, until the problem is fixed. This is wrong. If the issue is not solved on time, you would still have to pay for it. If you don’t, it will most likely cause more problems for you. After you’ve paid and the problem is fixed, the bank will reimburse the extra money back to you. However, if you don’t pay, your credit score will be affected.

Scraping the Pot to Pay Bills

Paying your credit card bills every month is good. But also make sure you’re not forgetting to pay the minimum fee for credit cards regularly. This will make your creditors assume that you’re struggling financially and that is not a good mark to have. Make sure you pay your complete payment before the due date to raise your credit score.

Disposing Your First Credit Card

It makes complete sense to do away with cards that are of no value to you. If your card gives you no rewards, has high interest rates , and high annual fees, it would seem like the perfect reason to get rid of it. However, if that card happens to be your first, we would suggest that you stick with it. But if you already have a card, it will contain your oldest credit statements and probably show your long list of successful repayments. This will reflect well on and improve your credit score.

Maxing Out Your Card Too often

Just because you have large cash limit on your credit card doesn’t mean you can use it all. In fact, if you use 60% of the credit you have, you will end up with a bad credit score. Even if you did pay your bills on time every month, it would make no difference, because your creditors will think you rely too much on credit. So if you have about INR 50,000, ensure that you stick to using less than 60% of that; a safe 50% is fine as well.

The most important thing is to keep a firm eye on your credit score whenever you can. Credit scores can change from month to month. Try to maintain a score of 750 and above.

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