How to build and improve your credit score with credit cards?

Building and improving your credit score is a critical step towards financial stability. A good credit score, ideally above 750, opens doors to various financial opportunities, including easier approval for loans and lower interest rates. Credit cards play a pivotal role in this journey. Here’s how you can leverage credit cards to enhance your credit score. 

Apply for the right credit card

The journey to a better credit score begins with choosing the right credit card. It is like picking a travel partner – you want someone compatible with your journey. Are you a frequent flyer? Maybe a card with travel rewards may suit you. Are you a shopping enthusiast? Look for cards offering cash back or shopping rewards. Remember, a card that aligns with your lifestyle not only increases the likelihood of approval but also ensures you can manage it responsibly, laying a solid foundation for good credit habits. Along with the rewards, check the eligibility for credit cards. In addition to the credit card age limit, other eligibility criterias usually include your income, employment status, and existing debt. 

Timely repay the outstanding dues

Consistently repaying your credit card bills on time and in full is crucial. Just as missing a workout can set you back, late payments can hurt your credit score significantly. To avoid this, treat your credit card bill like an important monthly appointment. Setting up reminders or automating your payments can ensure you never miss this crucial date, keeping your credit score on a steady upward trajectory.

Maintain a low credit utilisation ratio

Your credit card utilisation ratio is a measure of how much credit you are using against your available credit card limit. Keeping this ratio below 30% shows lenders that you are not overly reliant on credit. This helps improve your credit score. You can maintain a low credit utilisation ratio by keeping an eye on your spending and remaining within budget, which is viewed favourably by credit bureaus.

Diversify your credit mix

A diverse credit portfolio, including both secured credit (like home loans, gold loans, loan against property, etc.) and unsecured credit (like credit cards, personal loans, consumer loans, etc.), can positively impact your credit score. This diversity shows lenders that you can manage distinct kinds of credit in a disciplined manner. However, it is essential to manage this mix wisely. Overextending yourself can result in financial strain, so it is all about finding the right balance.

Restrict credit enquiries

Every time you apply for a credit option, it triggers a hard inquiry into your credit report. While one or two enquiries will not make much of a difference, several in a short period can reduce your credit score. Therefore, it is a smart move to first thoroughly research and compare different credit cards well through online financial platforms and then only apply for the preferred credit option. 

Periodically examine your credit score

Periodically reviewing your credit score is the same as a routine health check-up. It helps you understand your financial standing and highlights areas that need improvement. Fortunately, many platforms offer free credit score checks. This habit is not just about tracking progress and finding out about credit score improvement; it is also about ensuring there are no errors or fraudulent activities negatively impacting your credit score. Early detection can save you from witnessing a poor credit score in the future. Note that a poor credit score of below 750 may make it tough for you to avail credit on favourable terms in times of financial stress or fund mismatches.

Ending note

As you begin your financial journey, consider applying for an IndusInd Bank credit card. With its customer-friendly policies, robust rewards program, and a variety of cards to suit distinct lifestyles, an IndusInd credit card can be a prudent choice to build a strong credit score. Apply today and take a step towards securing your financial future. However, before you hit on the apply credit cards option, ensure to perform in-depth research to zero in on the best card.