When calculating your credit score, one of the most important factors that credit bureaus look at is your past payment history, which includes both loan and credit card payments. Credit cards are a mode of payment without an interest component if you pay everything timely, whereas, in contrast, there is a compulsory interest cost that is incurred when taking out a loan to fulfil various financial goals such as owning a home or car, providing higher education for a child, etc. However, loans are taken out to fulfil various financial goals such as owning a home or car, providing higher education for a child, etc.
And to help you make the most of one of the most important benefits of credit cards—namely, that they can serve as a stepping stone on the path to a higher credit score, which can see by building the habit to check my credit score from time to time.
Make sure that your credit card bills are paid on a consistent and timely basis.
Your credit score is based, in part, on the information provided by the credit card issuers on the amounts you pay toward your credit card balances each month. It is extremely important to get into the habit of making on-time and complete payments toward your credit card balances. This is because your credit payback history is one of the primary factors that go into calculating your cibil score for a credit card. If you do not do so, your credit score may suffer, and as a result, your eligibility for loans and credit cards, as well as your chances of being approved for either, may decrease.
Users of credit cards who are having trouble repaying their balances on time and in full may want to explore converting their entire outstanding balances or some large-ticket transactions into interest-free instalment payments (EMIs). They would be able to return the debts in more manageable amounts at an interest rate that was lower than the financing charges, and they would have the option of picking a duration that might be as high as five years.
Maintain a credit usage ratio that is no more than 30 percent
Your credit usage ratio, often known as your CUR, is the percentage of your total credit card limit that has been used. If you have a credit utilisation ratio (CUR) that is more than 30%, creditors typically view this as a sign that you have an excessive need for credit. As a result, credit bureaus have a tendency to lower your credit score by a few points if you exceed this threshold. In order to protect your cibil score for credit card from being negatively affected, you should keep your CUR at or below 30 percent.
Those who do the task of checking my credit score and see that they consistently go over this threshold have two options: they may either ask their financial institution to increase their credit limit, or they can apply for a second credit card. If you do this, you will see a reduction in your CUR as long as you do not end up increasing your credit card spending after you have received an increase in your credit limit.
Do not send multiple enquiries to lenders.
As soon as you directly submit an application for a loan or credit card, the lender will immediately request your credit report from the relevant credit agency in order to determine whether or not you are creditworthy. These kinds of credit report queries conducted by lenders are known as “hard enquiries,” and each one will result in a few points being deducted from your cibil score for a credit card.
If you need a loan or credit card after ensuring that the check my credit score task is done but don’t want to deal with the hassle of applying for each one individually, you might want to check out one of the many online financial marketplaces instead. These websites can let you compare several lenders and select the most appropriate one based on your eligibility and the requirements you have for your finances. While inquiries into your credit record that are started by such sites are handled by credit bureaus as “soft enquiries,” which have no bearing on your credit score, hard enquiries are considered more seriously.
It is best not to close all your older credit cards.
When calculating your credit score to make it ready for you when you do check my credit score, one of the most important factors that credit agencies look at is the length of your credit history, measured in terms of its average age. Lenders have a tendency to favour extending loans to borrowers who have a greater average duration or age of credit history. As a result of the fact that your credit history is comprised of the timely repayment of your loan EMIs and credit card bills, it is absolutely necessary for those who use credit cards to save their old credit cards. Your credit score will take a hit in not just one but two different ways if you close older credit card accounts.
To begin, your total credit limit will be decreased, which will ultimately lead to an increase in the percentage of your available credit that you are really using (CUR). When your credit utilisation ratio (CUR) goes above the 30% threshold, your cibil score for credit card will drop by a few points since credit bureaus generally regard a CUR that is above this mark to be an indicator of credit appetite. Second, when you close older credit card accounts, the average age of your credit history will shorten, which might have a negative impact on your credit score.
Examine your credit report at regular intervals
Your credit report provides a summary of your past credit payback history, which is used as the basis for computing your credit score by credit bureaus. Since creditors determine whether or not you are creditworthy by requesting your credit report from the relevant agency, it is in your best interest to check your credit report on a regular basis, preferably at least once every three months. This practice would assist in the quick identification and correction of any probable clerical errors or fraudulent actions in your report, both of which could have a negative impact on your credit score, which you could see as reflected in a report when you check my credit score.