Festive Season Shopping: The festive season is in progress. Most of the people wait for this time of the year to shop. If cash is not available for this purchase, then credit card is also used. However, caution should be exercised regarding the use of credit cards as it directly affects our credit score. In such a situation, you should avoid some common mistakes that affect the credit score badly. Some of these mistakes are also such that most people knowingly or unknowingly.
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1. Not to spend more than 30% of the credit card limit
When you issue a credit card, with this you get a limit that you can shop the same amount for the maximum amount through this card. However, it is not prudent to spend the entire limit. The percentage of credit card limit you spend is called the Credit Card Utilization Ratio (CUR). You should not keep the CUR of your card more than 30 per cent because this usually makes banks careful in lending to people whose CUR is more than 30 per cent. By using a higher limit, it will feel that you are more confident of credit and credit bureaus can also reduce your credit score.
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2. Do not delay EMI and credit card bill payments
Credit card gives you a chance to do shopping but it is not wise to spend more than capacity. This can make your financial situation worse. There may be problem in timely repaying EMI and credit bills if you spend more than capacity. If their payment is delayed then you may have to pay a fine and the credit score may also be reduced.
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3. Check the credit report periodically
If the festive season is going on, do not forget to check your credit report in the shopping environment. It is prepared on the basis of information sent by the bank. If the bank sends any wrong information by mistake then your credit score can be affected wrongly. In such a situation, you should keep checking credit score at regular intervals so that mistake can be caught in time.
4. Thoughtful loan guarantor
Usually, you face a situation when you have to become a guarantor for someone’s loan. In such a situation, you have to take a careful decision because in the event of becoming a guarantor, you will also be responsible for paying the loan. In the event of delay or default in loan payment, not only the borrower, but also the guarantor will affect you negatively and this effect will be seen on the credit score.
5. Don’t ask again and again
Many people inquire very often to get the best deal. This should not be done. Whenever you make this type of inquiry, its effect is also visible on your credit score.
6. Do not have more than one credit card
Many people keep a lot of credit cards to increase their purchasing power and for financial freedom. However, it has a negative effect on credit score. Apart from this, it can also prove difficult to keep checking all the details of every credit card.