New Delhi11 hours ago
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Credit card usage is increasing rapidly in the country. Many times people pay bills with credit cards in the hope that this will increase their credit score. However, some people find themselves disappointed that their credit score remains stagnant or continues to fall despite consistent spending.
Here are some of the major reasons why a customer’s credit score may not improve despite making bill payments on time. Credit scores range from 300 to 900. Scores below 650 are considered poor.
Avoid spending 30% more than the limit Excessive credit card utilization can be the reason for a stagnant or declining credit score. The ideal situation is to use 10-15% of the card limit. Spending more than 30% may freeze or worsen the score. That means, if your credit card limit is Rs 1.5 lakh, then you should not spend more than Rs 45 thousand every month.
Check credit report regularly Credit reports are not 100% accurate. These mistakes can misrepresent your financial behavior. In such a situation, check credit card report regularly and get any mistakes rectified.
Have both secured and unsecured loans in your debt list. A balanced credit profile should have both secured and unsecured loans. Dependence on one type of debt like a personal loan or credit card hampers the credit score. In such a situation, secured loans like gold loan should be included in the loan.
Do not apply for multiple loans at one time Don’t apply for multiple credit cards or loans in a short period of time. This increases inquiries on credit reports. This causes your credit to decline because it sends the message that you are in dire need of credit.
Effect of negative record can last for 7 years Even if you are currently making all payments on time. But if the old record is not good then its effect can be visible on your credit score for 7 years.
Do not close old credit accounts People often close old credit cards, but this can hurt your score. Having an old credit card means that you have been managing credit for a long time.