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How You Can Use a Credit Card to Improve Your Credit Score

  • Highlights

  • Pay your bills on time

  • Meet the minimum repayment amounts

  • Set a realistic card limit

  • Get an emergency personal loan and repay it on time

Have you only thought of credit cards as instruments to avail instant financing to fulfil your various needs? If yes, it’s time to look beyond, as prudent use of these plastic cards can significantly improve your credit score. This score reflects your creditworthiness to potential lenders and plays a crucial role in the loan application process. With a little planning, you can utilise your credit card to improve your credit score.

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Pay bills on time

Late payment of bills - electricity, water, telephone, Internet - can negatively impact your credit history and score in the long-run. You can use your credit card to pay off these bills before the due date.

Since the amount of these bills are lower compared to purchasing goods, you can quickly pay off the outstanding amount within the stipulated time. This has a positive impact on your credit score and enhances your cibil score by giving you more creditworthiness.

Additional Read: Check Credit Card Balance

At least meet the minimum repayment amount

There can be times when you can’t pay off the entire amount you owe towards your card. However, there’s a minimum repayment amount that you have to make to avoid penalties. Inculcating the habit of making at least the minimum repayment before the due date shows lenders that you are a responsible borrower who doesn’t want to default on payments.

This can have a positive impact on your credit score. However, note that making the minimum repayment brings only temporary relief. You still need to pay the entire amount you owe towards your card.

Additional Read: Minimum CIBIL Score For Personal Loan

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Avail interest-free emergency personal loan at competitive EMIs

New-age credit cards, known as SuperCards, allow you to convert your loan limit to avail an interest-free emergency personal loan for a certain tenor. Note that personal loans being unsecured in nature, attracts a relatively higher interest rate, resulting in high EMIs. Defaulting on the EMIs of personal loans doesn’t augur well for your credit score. However, with SuperCards allowing interest-free personal loan on the available limit, the EMIs are quite competitive that you can pay on time, thereby improving your credit score. Fast and hassle-free, these cards offer you instant financing when needed the most.

Bajaj Finserv RBL Bank Platinum Plus SuperCard

Set your own card limit

As a credit card holder, you get a certain limit beyond which you can’t spend. While your card issuer sets a certain limit, it’s essential for you to set your own card limit. This would help you to not only keep a check on your spending habits but ensure you are able to pay the amount borrowed on time. Regular and timely payment of the outstanding amount helps improve your credit score and boosts your creditworthiness. Factor in the essential expenses and the existing EMIs while setting your own limit.

Additional Read: How To Use Credit Card Reward Points

The bottom-line

The increase in disposable income and changing lifestyle patterns have made credit cards a modern-day need. They not only give you money to take care of essential requirements, but can also improve your financial health and credit score if utilised in the right manner.

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