It is a fact that almost all of us stumble at one point or the other, and find it excruciatingly painful to manage our finances well. In fact, there are times when we can’t merely help but overuse our credit limits due to mounting medical bills or skip paying our EMIs (Equated Monthly Instalments) due to an unexpected layoff. While all of this may be unavoidable, there are certain blunders that you must avert at all costs, regardless of the financial crunch you are facing. Doing so will not only help you maintain a respectable credit score but will also ensure that your financial health improves over the course of time!
There are times when you can be lazy or even ignorant regarding your bill payments. However, it isn’t a right way to deal with your finances, since something as simple as a 30-day late payment can have some severe repercussions for your credit rating. While your lender may not report a few day’s late payments to the credit bureau, but it can still slam you with an uncalled for late fee, especially if you repeatedly commit the mistake. If you aren’t good at remembering dates, it may be a good idea to request for text or email notifications from your bank. Moreover, you can opt for the automatic payment service to ensure that your dues are cleared without any delay, whatsoever.
Since more significant loan payments such as that towards Home Loans and Car Loans seem more significant, many people commit the mistake of delaying their Credit Card bills and paying off other loans instead. Here, it is essential to understand that the minimum payment on your Credit Card is usually confined to 1 to 2% of your total balance. Hence, on a bill of Rs. 10,000 you will only need to pay Rs. 200 to avoid late charges, which should be manageable. Thus, you must ensure that both, your loan payments as well as Credit Card bills get equal attention.
Yes, we understand that skimming through each bill and tallying the same with your Credit Card Statement can seem to be a cumbersome activity. However, doing so can expose any incorrect billing or suspicious charges. If you find anything that is out of place, you can always request for an explanation from your merchant, or dispute the inappropriate charge. Moreover, if there are any fraudulent charges, you can get in touch with your Credit Card Company and mend the damage. In the case of the latter, if the allegations are correct, the company will take the requisite action and will replace your card with a new one. In fact, you won’t even be held liable to pay for any unauthorised transactions. However, this is only possible if you analyse your statements carefully. And yes, don’t forget, most banks and even courts of law honour the charges just if you file a complaint with 60-90 days from the date of the transaction.
Credit reports are known to be plagued with numerous mistakes, and this occurrence is usually far more than you can imagine. Hence, even if you are maintaining an excellent level of discipline, your reports may prove otherwise. This makes it extremely important for you to order a free copy of your credit report, and review your score at least once a year. This way, if there is any discrepancy, you can take up the matter with the concerned authorities. On the other hand, if you are at fault regarding one or more of your payments, you can rectify the mistake and ensure a better score in the coming future. The key here is to be aware of all that is happening in this context, and take charge of the situation before it gets too late.
If you have an old Credit Card that you no longer use, there are chances that you contemplate closing it for good. While keeping an extra card may somewhat be a hassle, you must understand that closing it can have an adverse impact on your credit score as it will indicate your incompetency to handle your finances.
Besides, closing the card will decrease your overall credit limit, and will affect your credit utilisation ratio negatively. Since the Credit Utilisation Ratio (CUR) is a significant aspect of your credit rating, it is best that you avoid impairing it unnecessarily. You should also understand that the longer your positive credit history, the more reliable you are considered by lenders. If you choose to close your card, you may lose this advantage. Hence, instead of closing the card, you may want to add a recurring automatic payment through it to ensure that it isn’t deemed invalid on account of inactivity.
The only situation in which you should consider closing the card should be if it attracts a significantly high annual fee. We hope that you now know the mistakes that you must avoid at all costs when it comes to ensuring an excellent credit score. So, make sure you adopt healthy financial habits, and if need be, use Different Types of Credit Cards, all judiciously and enjoy the many benefits of a good credit score, right from quick loan approvals to low interest rates!
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