The pandemic they say has been a great equalizer. Everyone going thru the same uncertainty, every industry hit with the same crumble, and every country endeavoring to regularize the unseen situation. Nevertheless our individual credit score has somehow remained distinctly singular to our habits. And there is no short cut to regain good credit but we can by all means better our credit by some best practices.
The pandemic has forced us to stay in doors and somehow our health , immunity anxieties over fighting the virus has surpassed over the planned move to buy a new car, an expensive dress , a voted purse or Jimmy Choo shoes. On a lighter note, stocking up on toilet paper was more rampant that booking those Air BNB at fantastic discounts. This left us with a somewhat good opportunity to not spend so much on our credit cards and eventually stick to just essentials that tide us over the stay home period. That itself was an opportunity to align our credit spending powers to balance out. IE: work on our credit score so that we are up and there when we are ready to spend again.
The first guideline would budget your buying even if for essentials because other amenities spend has slowed down. And since you could do without that dress or purse these last four months, you can continue to do without it until you re arrange that credit score.
From April its been easier on the pocket than the same months last year or years before that. This would be good time to reduce your number of credit lines you have. Because the simple logic is the number of cards impact your credit score. It’s a good practice to always remember a credit card is money lend by a bank to us. It works because we don’t want to carry cash , but it has to be paid back to the respective lender. That way we are on our toes and make judgmental calls not to bust the limit. Focus that in all eventuality we have to pay the source. This way we stand firm from liquidity perspective.
Cards mandatory ask a 5% repayment expected on due date. That Is to keep in mind when we make our purchases. Simply because late payment fees are charged along with interest rates applicable and taxes. To avoid these extra burden on our repayment process. Its good practice to do the simple math every time you swipe that lucrative card on purchases way beyond our means. As its said, there are no free lunches neither are dinners or breakfast. That’s another good snooze in your head while making those purchases when you are working to aligning your credit line.
Another attempt to save or repair your credit score, is to avoid cash withdrawals on your credit cards. The financial charges on these are way higher than we can calculate in case you are one of those who make minimum payment of your cards. Cash withdrawals on credit card is never is good exercise .Period. This brings us to the next step is always try and attempt to make full payment on your cards. Credit cards offer us security in lieu of cash, hence the way they are utilized make us appealing or reviling to the lender. IE the bank or financial institution. This directly affects our credit rating. Because customer spend behavior pattern is tracked by all lenders.
Another important piece of advise before we wind up avoid using credit cards outside of your territory . The cards that are even touted as discount at international usage; hit the holder with costly conversion changes, because spending in foreign currency influences the card to be swiped at the real time conversion along with levied charges that can be anywhere from 3% to 5 % or less depends on the bank card you are using. But believe me no bank leaves this opportune to make more money out of the card holder.
Even the pandemic cannot stop bills and EMI’s that are contracted month in and out. Although a lot of finance houses are offering deferment in repayment. A wise move would be keep abreast of such places and really apply to them. Make a solid move to approach them, ask them if you fit the criteria and negotiate your repayment plan, this is in case your credit is way busted and in need of quick fix. Deferment now can only work if and only if you plan to stick with your budgeting . If you are not so sure on your cost to income (CTI) flow period on period annually. Work out simpler terms for month to month on your own.
Last but not the least, work out your expenses spent on all cards put together between 25% to 40% based on your debt burden which is not imputed on the card. Like rent, school fees, etc. for Example: higher the EMI on a mortgage loan then exercise a 25% budgeting on your cards limits put together. If you run lower cost on your living expenses then can keep on 30% which is a sweet number in all probability.
To sum up the best practices, always remember, our cards are our identity to better credit and using them wisely makes us less susceptible and keep our neck above credit waters.
Contributor: Beena Karkhanis