Be Penny Wise With Credit Cards
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Understand Credit Limit: Credit limit is a very misleading term. Just because you have a credit limit of Rs 1 lakh doesn’t mean that you end up spending all in one go. It reflects negatively on your credit score. If you want better credit scores, it’s advisable to lower your utilization ratio.
Lenders do not like high credit utilization: Now, why should you keep your utilization rate low? It is a simple explanation. You have the ability to spend it but if you don’t then that shows you keep your
Drop in CIBIL score: Your credit score may get negatively impacted when your balances on credit cards are very close to the ’credit limit‘ reflecting on your credit report. For example, if you have used Rs 90,000 out of a credit limit of Rs 1, 00,000, it may negatively impact your CIBIL credit score.
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So use your card carefully, responsibly pay your bills on time, use your credit limits wisely and enjoy the credit card benefits to the fullest.
About the author: Rajiv Raj is the director and co-founder of www.creditvidya.com.
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