How to maintain optimum credit score


Saisha has just begun her career as a research analyst. She is enamoured by the power of credit cards and views them as an easy way to purchase what she wants without worrying about a cash crunch. Thanks to her above-average earnings at this stage, various lenders are keen to offer her credit cards. A credit card would ensure that she has access to credit at her fingertips especially in case of emergencies.

Careful usage and prompt payments will positively impact her CIBIL score over time, which will be a useful metric in the long term. She is also aware that lenders reward credit-conscious consumers by increasing the credit limit. However, she worries that any late or missed payments on the credit card bill can incur late payment fees and impact her CIBIL score, in turn affecting her access to future credit. She wonders if there are any dos and don’ts to follow while using a credit card that will help her maintain an optimum credit score.



While Saisha will be offered different cards, she should pick the one that suits her requirements. Instead of opting for multiple cards, she must choose one or two that will limit her credit exposure and accumulate points every time she makes a transaction. Moreover, the lender will carefully assess her repayment ability before ascertaining the available credit limit. However, Saisha will do well to ensure that she applies her own filters and chooses a card and a limit keeping in mind her income and repayment capability.

It would also help if Saisha can plan her purchases and forecast her credit card expenses. It would be a good idea to decide which of her monthly purchases would be made with through credit card. Also, she must look out for promotional emails and messages from the credit card provider, especially around festive season.

Additionally, she could opt for a zero per cent interest card that essentially offers no-cost EMIs on certain large ticket purchases on various online platforms where the interest amount is discounted from the order price. However, she must read the fine print carefully and ensure that the ‘zero per cent interest’ card does not include any hidden costs such as annual, processing or transfer fees.

While credit card bills do provide a 45-day repayment window, Saisha must bear in mind that it is always best to pay off the entire due amount before the due date. Assuming the payment is not made within the interest-free period (often between 45-60 days), the interest rate charged can be as high as 36% per annum.

She must be sure to pay up the full amount due on time, every single time. Smart use of her credit card will help her build a good credit footprint as long as she is responsible and remembers to repay the full amount on time.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)



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