Four ways to use credit cards to improve your CIBIL Score

Updated on: May 21, 2022

Credit cards are a progressive tool for meeting short-term financial goals. In fact, modern credit cards even make purchases a lot more affordable with the many features they come equipped with. For instance, with the right credit card, you can make big-ticket expenses affordable by splitting the payment into instalments. There are many benefits of such a provision, with the most important being that it reduces the strain on your savings. It also comes in handy when learning how to improve your CIBIL score as such features can help you establish a repayment track record. 

In fact, there are many ways in which your credit card can be used to boost your CIBIL score. This is because it is a credit instrument and using it wisely adds to your credit exposure and mix. Moreover, with banks and financial institutions relying heavily on CIBIL scores to gauge whether to grant loans or credit cards, it is important that you use it wisely. It is also prudent to know how to improve CIBIL score with a credit card as it is quite easy to do so. To know the different ways to increase your CIBIL score with a credit card, read on.

Select the right type of credit card to avoid multiple applications Credit cards have now become a lot easier to get and many lenders will extend special offers to you. Keep in mind that each offer will lead to a credit application, and these will require issuers to make a hard inquiry into your CIBIL report. Hard inquiries lower your CIBIL score, which is why you shouldn’t be quick to accept all the offers you get. Ideally, you should only select a credit card that best suits your purchasing habits. This way, you can make the most of any benefits or perks offered, without requiring several active credit cards.

Do note it can be helpful to have several active credit cards. So long as you don’t make several new applications in a short period of time, you can use these cards to maintain and build your CIBIL score. In fact, having several active credit cards increases your total credit limit and this can make it easier for you to maintain the ideal credit utilisation ratio.

Maintain the ideal credit utilisation ratio and do not use the entire limit The maximum limit on your credit card is assigned to you by your issuer based on their evaluations of your financial and credit profile. While you can access the full limit assigned to you, it is important to use your credit card limit wisely. Ideally, you should strive to maintain a credit utilisation ratio of 30% or lower. This is based on your total limit and exceeding this limit will reduce your CIBIL score. So, if you want to improve your score, it is proven that maintaining the right ratio helps and will work favourably when done consistently.

Pay your credit card bills promptly The most important rule of using credit cards is to ensure that you can make timely payments. There is a specific payment window and you usually have the option to either pay the minimum amount or the entire outstanding amount due. To improve your CIBIL score, always pay the full credit card bill and not just the minimum amount. Making full payments consistently helps you build a steady repayment history and this boosts your score significantly. To notice how this helps, check CIBIL score details and access your CIBIL report online on the Bajaj Finserv website. Simply fill a simple form and verify your identity to know your details.

Monitor, plan, and predict card expenses The easier way to maintain an adequate credit utilisation ratio is to monitor your expenses and spend within the limit. You can do so by checking your credit card statements every month. These will have details of your transactions, available limit, outstanding balance, and more. Use this information to evaluate your spending pattern and take appropriate action in case of overspending. If you have multiple credit cards, plan and distribute your spending across these to ensure that you don’t overuse any one single card. Doing so will help you maintain a healthy credit card limit, which can come in handy in an emergency.

These tips should assist you in understanding the different ways to make the most of a credit card, while also using it to improve your CIBIL score. Knowing how to improve your CIBIL score is important and a credit card can be helpful in this regard. Remember, good credit health begins with good financial habits. Stay alert to any changes in your CIBIL report and you can do so easily when you check CIBIL score for free on Bajaj Finserv. Use the service, access a customised credit health report, and monitor your financial wellbeing with ease.

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Published on May 21, 2022
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