A Guide to Build ‘Good Credit’ using Credit Cards

Posted on Thursday, October 22nd, 2020 | By IndusInd Bank

Credit Cards, when used responsibly, are a convenient financial tool. Not only can you use a Credit Card to make purchases, but you can also essentially upgrade your lifestyle with the right product. Given that a majority of businesses, establishments, restaurants, and hotels accept Credit Cards, they have become a popular way of paying for purchases, both online and offline. 

However, there is another good use you can put your Credit Card to – building a good credit profile. If you use your Credit Card responsibly by paying your dues on time, you can create a promising credit history over time.

The Importance of Credit Cards

Credit Cards have evolved as a secure and convenient payment mode. Benefits ranging from reward points on purchases to the ease of making big-ticket purchases have made Credit Cards immensely popular. What’s more, these Cards are excellent credit-building tools. All you need to do is find a Card best suited to your needs, use it reasonably, and pay your bills on time.

A credit score is a number that indicates your risk as a borrower and the possibility that you’ll pay your bills on time. If you have a good score, you can easily get additional credit in the form of increased credit lines, mortgages, personal, and consumer loans. When you use your Credit Card in a responsible fashion, your credit score gets a boost.

The Importance of Good Credit History

Your credit history informs new lenders how responsibly you use credit, and how likely you are to return the borrowed money on time. Thus, the better your credit history, the easier it is to get new loans and lines of credit approved. Good credit history also eventually paves the way for lower interest rates when you borrow.

Credit history can involve many elements such as payment history, amount of debt, and a record of borrowing, utilising, and repaying credit. And more often than not, bad credit history has not fixed itself overnight.

The only way to stop late payments affecting your credit score is by always staying on top of those payments. Focus on maintaining a healthy credit history by making timely payments and settling old debts.

How to Keep Your Credit Score in Good Shape

Only borrow what you can afford

Each time you use your Credit Card, you create more debt. And if you borrow more than what you can pay off each month, it will pile up. Your credit score is directly impacted by how you use your Credit Card. Thus, only borrow as much as you can reasonably pay back on time. This will ensure you have a positive payment history that will help you build good credit.

Pay bills on time

Credit Cards come to your aid when you are faced with unexpected or large expenses. But, you need to pay your bills on time or you will be charged a higher interest on late payments. This means your debt pile rises. If you frequently make late payments, it will eventually hurt your credit history and lower your score.

Don’t apply for too many cards at once

If you have many Credit Cards, you can lose track of their billing cycles, credit limits, and payment due dates. As you now know, late payments are never good for your credit score. Moreover, it can also lead to unnecessary debt resulting from overspending.

Check for inaccuracies in your credit reports

Your credit report contains information about the accounts you’ve had and your complete payment history. To improve your credit, it is important to regularly review your credit report and check for any inaccuracies.

A good credit score is beneficial in the long run, but building it is a time-consuming process. Using Credit Cards to boost your credit score can be an effective way to improve your score, if you responsibly pay the bills. Create a long and reliable credit history and your credit score will eventually improve.

Find a Credit Card that suits your lifestyle and aspirations, only at IndusInd Bank. Enjoy a world of rewards, privileges, and offers across categories with our Credit Cards.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.