Having an impressive credit score is vital to be able to raise a loan at a convenient rate of interest. Someone with a high credit score can easily pull off a better deal in terms of low rates of interest and a higher loan amount. On the other hand, someone with a poor credit score is unlikely to get a loan approved for a big amount. And even if he gets the approval, it is likely to be at a high rate of interest.
There is a misconception that only those customers who default on their payments have a poor credit score. There could be multiple reasons for a poor credit score. Here we list out some of the key mistakes which credit card users should avoid to maintain a high credit score.
High credit score: 5 key mistakes to avoid
I. Paying minimum due on credit card: There are some customers who tend to pay the minimum due on their credit cards without realising that it affects their credit score, while they also end up paying a higher amount on account of late fee charges and extra interest.
II. Lack of credit mix: Another mistake which some people make is taking one category of credit only instead of maintaining a healthy credit mix such as credit card, personal loan and home loan etc.
III. Max out credit card: It is not recommended to max out the credit card. When you spend all the credit limit, you do it at the expense of your credit score.
IV. Delay in credit card’s bill payment: You typically get around 45-day interest free period including the time lag between the bill generation and the last date of bill payment. But is important to make the payment on the last date.
V. Guarantee to defaulters: When you give a guarantee to a friend or someone you know and that person happens to default on the payment, it affects your credit score. Therefore, you should be wary of giving any sort of guarantee on loans taken by others.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.