Don’t Let THESE 4 Credit Card Mistakes Hurt Your CIBIL Score; Check Tips To Avoid Debt Trap

From cashbacks to reward points, credit cards come with a myriad of benefits, but the easy credit money also comes with penalties, minimum amount due, and potential damage to credit scores due to delayed repayments.

Many Indians often pay only the minimum amount due on their credit cards to avoid penalties. However, this does not help them escape the interest charged on the outstanding balance, which can go as high as 40% annually. Reckless use of credit cards and unplanned borrowing can push individuals into a debt trap, leading to a pile-up of debt that may take years to clear. So here are the top four mistakes that can hurt your CIBIL score and even lead you to credit trap.

Minimum Amount Due Trap

The facility to just pay the minimum amount due (MAD) might look convenient, but it can cost you big in the long run. Credit card users must always target to pay the full statement balance every month and not just the minimum amount due.

Full Utilisation of Credit Limit

Complete utilisation of the credit limit can burden you with a higher amount for repayment next month. Hence, it is better to target payment of the full statement every month, instead of the minimum. Keep credit utilisation under 30% of your limit, and under 10% if possible. Automate payments so no due date is missed by mistake.

Missing Credit Card Payment

Missing on credit card payment can cost you big. Missing the deadline for payment makes up around 35% of the score. Additionally, credit card users must avoid closing the oldest card, as it supports credit age.

Applying For Too Many Cards

Avoid applying for too many credit cards. Try to follow the 2/3/4 rule helps: maximum 2 cards in 30 days, 3 in 12 months, 4 in 24 months.

Disciplined Use Of Credit Card

Credit cards should behave like debit cards in daily life. Spend only money already sitting in your bank account. The credit limit is not extra income; it is a test of discipline. Build an emergency fund so surprise expenses do not push you back into credit card debt again.

Reduce Card Balance

One of the easiest ways to improve a credit score is to bring down card balances below 10-30%. Raise disputes for any error on your credit report at once. Try getting added as an authorised user on a family member's well-managed card. Paying before the statement closing date, not only the due date, can also help.