Live Cheaper on Credit Card for Better Credit Score
Credit cards are great. They are convenient to use. They bail you out of trouble at times of real emergencies. When used correctly, they even get you a cheaper life! How so? Your financial standing is reflected in a credit report compiled by credit rating agencies such as Credit Bureau Malaysia, CTOS or RAMCI. The report contains information such as your credit limit, credit card loan application history, payment defaults and repayment history. Every positive behaviour will be rewarded with good credit score and vice versa.
So, how does your credit card get you a cheaper life? When considering your loan applications, the banks would gauge your repayment capability based on your credit score. An excellent credit score not only gets you fast loan approval, but the best interest rate! In a nutshell, the better your credit history, the cheaper it is to borrow money.
Therefore, when you are finally ready to purchase your dream car, those interest rate savings could add up to thousands of Ringgit in the long run. On top of that, having a good credit score will open up access to better credit cards with great rewards and fee waivers!
Top 5 Credit Card Hacks to Improve Credit Score
There are some tips on how you can improve your credit score.
- Pay your bills before due date
Past payment performance is usually an indicator of future payment capability. If you pay all your bills as agreed before the due date, you can positively influence this credit scoring area. Meanwhile, if you pay less than the minimum amount required or past the due date your credit score can be negatively affected.
- Keep credit card balance under 30% of your credit limit
There is no hard and fast rule on credit utilisation. However, using too much of your available credit limit hurts your credit score as some scoring system penalises credit card users for using more than 30% of the available credit limit on any cards. Hence, do keep your credit card utilisation below 30% of your available credit limit and pay your bills in full and on time each month.
- Cancel that spare credit card
While having a high credit utilisation ratio ruins your credit score, having an “emergency” credit card that you do not use could also affect your credit score negatively. Continued non-usage of the card could eventually prompt the issuer to close your account or stop sending updates to major credit reporting agency.
- Convert bad debts to good debts
Credit scoring systems view credit card debt as “bad” debt. The more credit card debt you carry, the more it weighs down your credit score. Converting your credit card debts into installment debts such as personal loan could be a quick way to boost your credit score. This is so as from a credit scoring standpoint, installment debts are less risky.
- Stop applying for more credit cards for a while
Here is some inside information. Each time you apply for a new credit card, the bank will retrieve your credit score from the credit scoring agency. Multiple credit card applications within a short span of time may be interpreted as a sign of financial distress by the credit scoring algorithm thus reducing your score. When your application is declined by any of the issuers, remarks will be left in the system and this will surely result to a double whammy!
For a win-win solution, monitor your credit score from Credit Bureau Malaysia for free through Mobylize app. The app will also provide you with suggestions of credit cards based on your current credit score. This will increase the chances of having your application approved!