Credit Card is quite useful for the earning individual. In the modern finance, individual can simply swipe their credit cards to complete their purchases, and can pay the outstanding amount later. Credit cards are quite useful when your finances are stressed, especially at the month ends.
However, there are several consequences of Credit Cards, if not used carefully. These cards can affect your cibil score or credit score, which could limit your access to some of the financial products and services as most banks and financial institutions consider credit score.
Through credit score or cibil score, an individual’s creditworthiness and capabilities to pay back any borrowed amount is measured. Therefore, any individual must be aware of the impact that credit card has on credit score.
How Credit Card Affects CIBIL Score?
Repayment: If you have a Credit Card and you pay the entire outstanding amount on time, it will have positive impact on your credit score. However, if you have a history of missing payments, it will deteriorate the credit score. Defaulting such payments can even have worse impact on your credit score.
Utilisation: Utilisation of the credit available on your card also impacts the credit score. Advisably, you should not use more than 30% of the limit available on your card. Non-adherence to this can have a negative impact on the credit score.
History: Closing a credit card, which you are using from a long time, can have a negative impact on your credit score. Basically, an old card builds the credit history, which improves the credit score.
Number Of Cards: Using more credit cards can be advantageous as you can keep your utilisation limit under the recommended limit. However, having more credit cards can negatively impact your credit score. It is recommended that an individual should not have more than 3 active credit cards at any given time.
How To Select Your Card?
Here are some key points to know before you get a credit card:
- Check if the credit limit offered to you, meet your needs as over utilisation of the limit can impact your credit score.
- Check what discounts and cashbacks the card is offering.
- Ensure that the annual fees or charges of chosen card doesn’t dent your pockets.
- Have a look at the terms and conditions before picking up the card.
