Should you use your Credit Card to build Credit History?

By Internal Eseo - March 19, 2018


Mr. Avinash Patel, a resident of Rajkot in Gujarat had availed an online credit card from one of the leading online non-banking finance companies (NBFCs). He also had a home loan to avail in future.

The credit limit on his credit card was Rs.1 lakh which he used to cover many needs and goals in life. Although he used about 50% of his sanctioned credit limit, he always made it a point to repay the EMIs on time. Why?

His financial advisor has suggested him always to pay the dues on time if he wants his future home loan to approve a lower rate of interest. What’s more, on time payments on credit cards could also mean building a good credit history.

If you are a person like Avinash who is using his/her credit cards to build a credit history to avail a deal on future loans, you are on a smart path. Let’s know some more in this regard!

Using a Credit Card to Build a Credit History – Some Guidelines!

Of course, using even the best credit cards has a direct impact on elements that make your credit score! Thus, availing a credit card and using it prudently is one of the most effective and quickest ways to build your credit super easy! Here are some guidelines!

Always Pay on Time and Full

Your credit always computes and analyzes how you manage your credits – borrowing and repaying money! To have a good credit history, you need to clock an on-time debt payment. If you don’t make such payments, you will have no good credits to your advantage to help you apply for an affordable loan in future.

Treat your Credit Card as a Debit Card

It’s always a smart move to allocate a budget to your financial needs whether you are using an online credit card or not to know how much available funds you have! Hence, always treat your credit cards like your debit cards so that you may be aware of an amount that you would be able to repay in full. Spending within the means would let you avoid carrying a balance and paying higher interest.

 Don’t Max out your Credit Cards

It is quite understandable to know that you may have some financial needs at the last moment which may lead you to consume the credit card’s limit to the fullest. Yes, many situations in life may lead us maxing out our credit cards. However, if you can, then you must take all resorts not max out your credit card at all. People maxing out their credit cards are a risk to financial companies as they think that such people will take years to repay the dues. And how would then be able to make way for further loan EMIs? Thus, financial lenders do not offer loans to them, and also maxing out the credit cards affect one’s credit history for sure!

The Bottom Line

Now that you are well aware that using a credit card to enhance your credit history has its share of advantages if you use it prudently, you can apply for an online credit card these days! All the best! 

  

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