Most of my friends say that it’s important to have a credit card. But most of the credit card users I’ve seen are cribbing for having one! I accept that managing a credit card will boost your CIBIL rating, but I have taken loans and repaying them consistently without any arrears. So is a credit card really needful for a person like me?
Credit agencies who manage your Credit Score look at whether you have different types of credit. The more the types of credit you have, the better your score. So, having a number of secured loans, unsecured loans and Credit Cards will help improve your Credit Score, as long as you pay your bills and EMIs on time. Even though it is not mandatory to have a Credit Card, having one can improve your score. Read this post for more information - https://blog.bankbazaar.com/all-about-your-credit-score/.
Even though it’s not mandatory to have one, a Credit Card can help improve your Credit Score. Here are ways in which you can improve your Credit Score using your Credit Card.
Get new Credit Cards but not all at once – Contrary to popular belief, having a number of Credit Cards doesn’t affect your Credit Score unless you start running huge outstanding balances on those cards. Every card helps you build your credit history. Timely payment for every card would mean a better Credit Score for you. However, do not apply for many Credit Cards at the same time. This would not only affect your Credit Score but might also lead to your application getting rejected. Allow for some time to pass between applications so that it doesn’t look like you are a Credit Card guzzler.
Stick to a 10-30% utilization – Credit bureaus look at how you are utilizing your credit. So, use only part of your credit limit. For instance, if your credit limit is Rs.1,00,000, use just Rs.20,000-30,000 a month on it. This would make you look like someone who uses credit in a responsible manner. This is where multiple cards help. You can spread your spending across cards.
Pay on time, every time – It is extremely important that you pay your outstanding balances on time every time. Every time you miss your Credit Card payment, it hits your Credit Score. And every time you repay on time it improves your Credit Score.
Rein in add-on cards – You cannot possibly control spending limits on your add-on cards if you give it to family members who don’t live with you. Also, the credit limit for your Credit Card would include that of your add-on cards. If the ones who use your add-on cards spend recklessly, it will affect your Credit Score.
Don’t close old cards – Typically the older your repayment history the better would be your Credit Score. So, do not close your old cards. Instead you can use them to pay routine bills such as your electricity bill or phone bill so that your repayment history remains intact.
Choose the right cards – It is important that you choose a card that suits your needs and your lifestyle. This will help you stick to your budgets and also ensure that you are not stuck with big balances. For instance, let’s say you are going in for a co-branded Credit Card that offers 10% cashback on online shopping if you spend Rs.10, 000 a month. You might be tempted to overspend on your card and buy things that you don’t need just to get that cashback. It is better that you choose a card that has offers for online shopping but doesn’t have any conditions attached.
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It’s not Mandatory to have credit card.It some time help you when you are out of cash in Emergency. Take an example My salary is 50k and I have planned to invest my savings in Fixed Deposit or Paying Home Loan and I left with only 6k as liquid cash every month after paying my other expenses plus saving. And Urgently Medical Emergency happens and you need to pay 80k in 1 days .In that situation you are not able to use your fixed deposit saving. Credit Card can help you to get out of this situation.It’s all depend how planned you use credit,