Credit cards can be a great way to keep track of money if they are used and paid back in a responsible way. There are a lot of myths and misconceptions about credit cards, just like there are about most other financial products. Some myths keep people away from getting the most out of their credit cards, while others cause them to use their cards in ways that are bad for their finances and their credit score.
In this section, we will bust some common credit score myths so that you are not confused about the outcome or changes in the score when you check free credit score next time.
Credit cards are a definite way to get into a vicious cycle of debt.
People are often afraid to use credit cards because they don’t want to get into too much debt. So, they don’t even bother to apply for credit cards. But it is indeed true that the only people who are likely to fall into a debt trap are those who don’t have the financial discipline and/or can’t control their urges to spend. Such careless users often don’t even check cibil score by pan card to know how it is impacting their score too.
Also, getting a credit card can be a great way for people who are new to credit to start building a credit history and work toward getting a high credit score over time. Since credit card transactions are handled the same way as loan applications, paying off your credit card balance on time has the same good effect on your credit score as paying off any other loan on time. Remember that people with no credit history or a credit score of 0 have a lower chance of getting loans with good fees and interest rates. You can easily check free credit score on various financial apps or portals.
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You should not raise your credit limit.
Many people who have credit cards and even keep doing a regular task of check cibil score by pan card don’t want to raise their credit limit because they think that doing so will make them spend more, which will lead to more debt on their cards. On the other hand, if you use a higher credit limit in the right way, it can have a big positive effect on your finances.
With a higher credit limit, you can handle financial emergencies, and your credit usage ratio goes down. The credit usage ratio is the percentage of the total credit limit that you actually use. Your credit score will go up as your credit utilisation ratio goes down, which will be visible when you next check free credit score. This will make it easier for you to get credit cards and loans in the future. Maintain a credit usage ratio of less than 30 percent. Lenders think that people who use more than 30 percent of their available credit are “credit hungry,” which causes credit bureaus to lower a person’s credit score by a certain percentage point. People who tend to go over this limit often could ask their current card issuer for a higher limit or think about getting a second card.
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Inconsistency in bill repayment does not harm a credit score.
A credit score is one of the first things that lenders look at when deciding whether or not to give someone a loan or card. They check cibil score by pan card to know your credit profile. Since a person’s credit score is based on how well they’ve paid back their debts in the past, as shown in their credit report, paying your credit card bills late or not at all can hurt your credit score and lead to high finance costs and late payment fees. After all of this, having a low credit score can hurt a credit card user’s ability to get loans and credit cards in the future. Ensure to check free credit score always before submitting any credit application.
It’s enough to pay the bare minimum amount due every month.
Many people who use credit cards make the mistake of thinking that paying the minimum due amount is a safe way to get out of their debt if they can’t pay it all back on time. This is not true. If a card user pays at least the minimum amount due by the due date, they won’t have to pay late payment fees, but they will still have to pay high financing costs, which range from 23% to 49% per year on any unpaid balances. Keep in mind that if you don’t pay even a small amount of debt on time, you will have to pay more late fees, and your credit score will go down, which will be shown when you check cibil score by pan card. Also, if you don’t pay off your credit card debts in full, you might lose the interest-free period on new credit card purchases until the old debts are paid off.
So, if you can’t pay off your credit card debt on time and in full, you might want to turn the whole amount owed or a part of it into a monthly payment plan. Due to the fact that the interest cost of EMI conversion is much lower than finance charges and that it is available for terms of up to 5 years, converting a credit card bill, either in full or in part, would allow one to make repayments at a much lower interest rate and in smaller chunks based on his or her ability to pay, as well as avoid paying finance charges on new transactions.
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Too many credit cards are bad for credit scores.
Another common misconception about credit cards is that having too many of them can hurt your credit score. But it is actually the way the cardholder uses and pays off his or her credit card that affects the cardholder’s credit score. Habits like paying off credit card debt in full and on time, keeping the credit utilisation ratio (CUR) under 30%, and not making a lot of credit inquiries, especially in a short amount of time, all help to build and keep a good credit score. A good reflection will be visible when you monthly check free credit score to know the impact of healthy credit habits.