Watch out for these 5 common mistakes of credit card users to maintain a good credit score. Let’s see how you score on the scale of 'guilty as charged' to 5.
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A good credit score (above 750) increases your chances of getting a loan or credit card,
and can also help in getting a lower interest rate. Bank or credit card issuer may reject
your application if you don’t have a good credit score. It’s important to keep these rules in mind while using a credit card.
While multiple factors define your credit score, sometimes it’s the small bad habits that affect your score over a long time. Below mentioned are the top 5 we spotted.
If you are swiping your credit card while overlooking your budget, you are basically racking up debt. Remember that putting an unplanned expense on a credit card is only going to bring down next month’s budget. So only account for things you’d be okay to pay off later.
● Avoid impulsive purchases
● Don’t max out your card
● Follow a budget
Your credit card statement is the summary of credit transactions. It’s important to review your credit statement every month to steer clear of fraudulent activities. Additionally, it lets you analyze your spending patterns so you can be mindful of your spending habits, eliminating unnecessary expenses.
Tip: As we are nearing inflation, it’s especially important to be mindful of your over-the-
top expenditure. Therefore, prioritize essentials like rent, utilities & investments before
luxuries & set yourself a credit limit.
Most people don’t check their credit score until they see a hard enquiry coming their way. Some have a misunderstanding that soft enquiries also affect their score.
Let’s first learn the difference:
A hard inquiry is when a lender looks into your credit history before approving you a loan or credit. Soft inquiry is when a person or a company runs a soft credit pull for reasons such as background check, pre-approved offers, etc. Hard inquiries may lower your credit score and are recorded on your credit report, soft inquiries don’t have any impact on your score.
So it’s important to keep checking your credit score once in a while. A bad credit score
is a clear indication that you are not using your credit card the right way. Track your credit score for free on OneScore.
Although your credit card lets you borrow money during an emergency, it does so for a short while. And if you fail to repay it on time, you accumulate debt with high interest rates. So ensure that your credit is not the only emergency fund you have.
It’s a good practice to have savings for bigger emergencies like job loss, health issues.
Experts advise to set aside at least 3-6 months of income as an emergency fund.
The minimum amount due option lets you pay about 5% of the total amount due. While it may seem like a convenient option, know that you are charged interest on the outstanding amount. This way you end up paying a lot more than what it was worth, and your credit score may also take a hit.
Always pay your credit card dues in full before the due date. You can also set up auto- pay or payment reminders for ease.
Have you been guilty of any of the above mistakes? It’s never too late to work on it. To begin with, check whether any of these mistakes are impacting your credit score.
The ultimate guide to getting a personal loan at the most favourable interest rates
- OneScore , November 01, 2022