Do you have your first credit card? Use it right away to raise your credit score [Updated 2023]

    Credit: Bank of India

Make sure to pay your monthly obligations on time. Your credit score is significantly impacted by this, which has an effect on your ability to get loans in the future. It can be a useful tool to build a good credit score for people who have just gotten their first credit card and are just starting out in their earning careers. However, there are consequences if you abuse it.

Have you considered getting your very first credit card? While you might be excited about its advantages, you should bear a few things in mind when using this product since it will be your first use of credit and will affect your ability to easily obtain credit in the future. Before extending credit, lenders take into account your credit report and credit score. One of the crucial elements that determines your creditworthiness is your credit score. The range of a credit score is 300 to 900, and anything over 750 is typically regarded as a good score.

Having a savings account? Now request a card from your bank

The millennial generation today is aware of the value of building a solid credit history, and with careful credit planning, they can eventually benefit from lower interest rates on large-ticket loans like mortgages. You can start off in this way with the aid of credit cards. At the start of your professional career, getting a credit card is always a smart move because it enables you to establish credit early on and gradually increase your credit score. Going to the bank where you have a savings or salary account is one of the simplest ways for a first-time millennial borrower or anyone else who wants a credit card to get one.

Using a credit card facilitates budgeting

Using a credit card facilitates budgeting. With a credit card, you have convenience and control, and if you use it sensibly, you might even be able to save. It begins a person's journey toward developing financial discipline, and additional advantages could include reward points, savings, cashbacks, etc. We are almost immediately made aware of our spending, allowing us to manage our money. Tracking spending habits when using paper money can be challenging, though bank statements can be useful.

The drawback of using a credit card is the temptation to spend more than you have because the credit limit is typically quite high. This might trap you in a debt cycle. In order to use credit cards wisely and steer clear of any financial pitfalls, it is crucial for consumers to have a basic understanding of how credit cards operate as well as the discipline to manage their finances.

                                 Credit: SBI credit card

Select the proper card

Study the options carefully and choose the card among them that best suits your needs and income. Consider a card with co-branding with a fuel company when selecting a fuel card.

Check the small print. Review the conditions and restrictions pertaining to benefits, interest rates, late fees for overdue or missed payments, annual fees, and the available credit limit. It is crucial to carefully read the late payment terms because this is one of the most common areas people overlook, which eventually causes inconveniences.

Ensure prompt payment

Your credit score may be significantly impacted by this one factor. Check the monthly bill's due date, then set a phone reminder or automate payments to make sure you never forget. If you miss the deadline, credit card companies frequently charge steep interest rates.

Pay the entire amount owed

Your credit history may not be impacted if you only pay the minimum amount due because it is not regarded as a default. However, it is subject to interest and other fees, which could raise the total balance owed. To ensure that you always clear the full amount for each billing cycle, it's important to maintain liquidity.

Regular bill checking

Make sure you are aware of your itemised expenses by carefully reading your bill; you might discover some purchases you can do without. It also enables you to look for errors on your statement and discuss them with the company that issued your credit card.

Spend with restraint

It is very simple to get carried away by the convenience that a credit card offers, especially around the holidays when there are lots of sales and discounts available. Just buy what you need, and exercise caution.

Be careful not to open too many credit card accounts at once

When there are numerous open accounts, it can be challenging to keep track of repayments. Furthermore, lenders may view you as riskier if you have open credit lines.

Financial responsibility is essential when seeking credit because it will automatically result in a good credit history, which will give lenders the assurance to lend to you as your credit needs change over time.