Credit Card’s Influence on Credit Health

Aug 2018 | Team Rubique

If you are leading a good life with an excellent job in an urban city of any country, then you are more likely to have one or more credit card. If you are an aware consumer, you already know what impact a credit card can have on your credit score. Your credit score is one of the vital elements, which collate your credit health. Despite knowing all the perils of a credit card, some people still fall prey to the menace of credit card and end up hampering the credit health. Until they realize, it’s too late for them to fix the conditions and retain their lost credit health. As they say, there is never a wrong time for a right thing, and it’s better late than never. You can chalk out some actionable plan to get out of such situations. It starts with knowing how credit cards hamper our credit health and help you embark with a strategy to avoid such situations.

How using your credit card can be affecting your credit health?

This is an important question to answer. If you do not rely on the credit, you have from your

the available credit card that is usually considered to be a good thing. However, if you are using your card and reaches out close to your limit, you would certainly be going to hamper your credit health. This is because the lenders often while calculating your creditworthiness see to the amounts you have borrowed on a regular basis coming closer to the given limit. This is often seen as a symptom with a higher risk of default despite the fact you have been paying the borrowed money even within the time limit every month. This can lead to missing any credit card payment, and this can have a significant impact on your credit health. As per experts, the on-time payments raise eyeballs of your lender that hurts your credit health.

How Opening up multiple credit cards hampers your credit health?

Whenever you apply for any credit card, the bank or company issuing the same will undergo a robust inquiry about you and your credit score. The hard inquiry by the issuer means that you have given the lender the opportunity to check your credit report in detail. The bank will get your credit score and check the various reports to decide whether to give you the credit card or not. Regardless of the fact whether you get the card or not, this hard inquiry will undoubtedly be shared with other credit reporting companies that will undoubtedly hamper your credit health.

Generally, the hard inquiries during the credit card application are added up a small negative to your CBIL score. The reasons are evident as the creditors do not like to see you have multiple credit cards in your wallet. Also, this gives a signal that a person with multiple credit cards is on the brink of defaulting on the payments.  Opening up new accounts too can improve the credit health in several ways. One of your lenders would increase your credit limit as well. This could be a positive thing for the lender as the bank can consider you to be a man who is competent to handle several accounts at one time. This can even add the message that your creditworthiness is increased.

How can losing your credit card accounts will hamper your credit health?

You may feel for a while that closing any credit card account can have a positive impact on your credit health, mainly when you were not able to manage the balances properly. This only gives the message that you do not have the capacity for managing accounts, and yet you created them. Even though if you have to close the accounts, make sure you the idea so that your credit health is affected to a smaller level. Consider doing the on-time payments avoid the maxed-out balances to name a few and then you are likely to boost your credit health and then think of closing the accounts. Closing any credit card only gives the signal that you are managing only limited cards than before, which also means that you want to restrict the allowed credit limit and thus have some amount of negative impact over your credit health.

Putting them all together

If you find using the credit cards a complex affair, then make things simple. You need to be honest with yourself and the way you use your credit card. If you are unable to pay the credit card balances and often struggle a lot while doing so by maxing out every time you see the due dates coming for your credit cards, remember any reward you would be getting with this will not be a useful thing for you at the long run. On the contrary, if you are getting rich rewards while using your credit card by making on-time payments, using the credit card within limits much below the allowed credit during the festive time and usual time, then you end up boosting up your credit health.

Transferring a Balance

It is common to people with multiple credit card holders are seen moving debt from card to the other to reduce the annual percentage rate or APR. However, if you are doing so, a balance to the current cards with the lower APR, you can save some interest amount but would end up hurting your credit health.

Conclusion

It is always recommended to maintain your debt levels low apart from paying the amount right on time can help you in boosting up your credit health. Now, as you know how a credit card can hamper your credit limits, make sure you chalk out the strategy to avert this issue.