Credit cards make shopping convenient. It is also very effortless to pay bills and make other online transactions through the best credit card. The rewards and discounts offered on these cards make them even more compelling to use.
Strong security features and easy EMI facility among other benefits have made credit cards stand out. These cards come with a pre-set limit. As this pre-set limit is a short-term credit given to you by a financial institution, it is sure to affect your credit history. But, if you use it responsibly, it can help you improve the credit score.
Nevertheless, there are a lot of myths about your credit score that you should steer clear of. If you believe them and act accordingly, they may end up hurting your credit score.
Myth #1 – An outstanding balance on your card can improve credit score!
You are mistaken if you think that an outstanding balance will establish you as a good user. An outstanding balance reflects your inability to repay the amount. If you keep a regular outstanding balance, it may instead end up lowering your credit score.
It is important to make on-time repayment as paying off the credit dues regularly reassures the company’s trust in you.
Myth #2 – Reaching your credit limit every month is right for your credit score
No, if you utilise the total available credit every month, your lender will get an impression that you rely too much on credit. Even though you repay on time, your credit score may reflect this high reliability in the form of credit utilisation ratio.
It is preferable to keep this ratio low. Most lenders give weightage to a low utilisation ratio of up to 30%. It will reflect in your credit history, thus, improving your credit score.
Myth #3 – Applying for more cards will improve your credit score
More cards or more accounts may bring greater harm than benefit for your credit score. If you randomly fill credit card application of a number of lenders, it increases the chances of rejection. And rejection of these applications hurt your credit score.
Also, in case your applications are approved, many credit card accounts at the same time do not help. A high cumulative credit limit is also a matter of concern for card issuers. They think you may not be able to repay the huge credit.
It is better to apply for the best credit card in the market that provides multiple benefits than have a number of cards. For example, with the Bajaj Finserv RBL Bank SuperCard you can shop to your heart’s content while earning rewards, discounts and cashbacks. This credit card is available in 6 variants with some industry-first features like easy EMI option, emergency loan, interest-free ATM cash withdrawal, etc. You need to meet minimal credit card eligibility criteria for availing this card.
You can also avail pre-approved offers on credit cards, personal loans, home loans, business loans and many other financial products and services. The offer makes the process easy and saves time. You may check your pre-approved offer by providing a few simple details.
Myths #4 – If you pay the minimum amount due, you are not counted among defaulters.
The misconception regarding minimum amount due can have a negative impact on your credit history. Minimum amount due is the amount you need to pay when you cannot repay the total amount due within the due date.
It gives you two benefits:
- Lender will not block your credit card.
- Interest will not add to your account.
Nevertheless, you have to pay the total utilised amount. Also, paying only the minimum amount due every month can severely hurt your credit score. If it is difficult for you to pay the total amount due, you can go for cards that come with easy EMI option for the repayment.
Hence, when aiming to increase your credit score by using your credit cards, make sure you do not fall for these popular myths. Know the truth and improve your CIBIL score using the best credit card.