Improving Credit score by Credit Cards

Are you facing financial crisis or have ever faced it? Well financial crisis is a very wide term and is applied broadly to a variety of situations in which some financial assets suddenly lose a large part of their nominal value. But we can use this term at a personal level too. When we are in a lot of debt and we don't have enough income to pay off the debt, then we are in financial crisis. There can be a number of reasons of getting into financial crisis. Some reasons are those on which we don’t have any control like job loss, illness, car accident or something that is beyond our control. And some are on which we have direct control like budgeting problem, debt payment, high interest rate etc. Have you ever thought of the consequences of what will happen if you are paying your credit card bills on time or if you are paying high interest rate on your mortgage? If not, then I highly recommend you to talk to a financial planner.

Making least payments

 If you are paying your credit cards bills on time or you are making a least payment, then the possibility is very high that the bank will ruin your credit history. Most of the people don’t have enough knowledge about cards. It’s not their fault, it’s the bank that sometimes smart and don’t tell the customers about the terms and conditions.

Using your credit card to full limit

If you have a credit card and let’s suppose you have a maximum limit of $1000 and you are using that credit card till $900 or more, then your credit history is not going to be favorable. One more thing that sometimes banks don’t disclose is an annual fee. Some credit cards charge you an annual fee which is not disclosed when you are shopping for a credit card. So whenever you opt for a service always read all terms and conditions.

More limits, more spending

It’s psychological that the more you have, more you will spend. So credit card companies take advantage of it by allowing you more credit limit. So when they call you about increasing credit limit, don’t say just “Yes!”  Think several times whether you have enough disposable income to pay your bills on time because if you have more capacity than you will spend more.

Never using your credit card

Some people treat credit card as a poker game. If you don’t play, you don’t lose. It’s the mentality of some people which is not right. Although it is advisable you pay off the credit card bill to avoid interest but not using your credit card will act as a backfire when it comes to your credit score. It shouldn't be like this that you are not using your credit card at all but charging any small to it may keep stable or improve your credit score.

Bunch of credit cards

Never ever own a bunch of credit cards. Owning cards of multiple brands can lower your score. You should own a maximum of three credit cards because everyone doesn’t accept Visa, MasterCard or American Express. So you can own these three different credit cards. Don’t take a hit at your score by applying for a credit card you know you probably won’t qualify for.

Pay off your debt if possible

If you have cash standing in your savings account and you have some debt too. Let’s say a car loan of $5000, then try to pay off your loan because you are paying more interest on your loan than you are earning on your saving account. This will improve your credit score too.