The Step By Step Guide To Credit Management

Have you ever felt choked by unsettled debts? Because the struggle with debts drowning you is real.

Just like many individuals, we’ve made some seriously questionable financial decisions that have not worked in our favour. While it’s never too late to learn what went wrong, it’s also never too early to be prepared at the financial front. When money is on the line, one might get a little or very anxious and feel absolutely helpless. We are here to help you break out of the notion and develop some self confidence and assurance no matter what your situation. In addition to preventing you from damaging your bank account and depleting any cash reserves that you might have been saving for an unprecedented day, we are here to help you manage your credit in the most efficient manner.

Here’s our step by step guide to managing your Credit and taking the heavy weight of debt off your shoulders.

• Understanding the most flexible form of Credit : Credit Cards

It is almost impossible for you to manage your finances without taking some or the other form of credit. One can expect to use at least some form of credit in their lifetime whether it’s a Credit Card, various loans such as a Car Loan or a Student Loan or perhaps a loan to start up a new business. Therefore, one has to understand how credit works. And that can be best grasped with learning to successfully use Credit Cards and that too correctly.

Credit Cards give us the power to borrow thousands of rupees free of interest for a period of a month or more. In theory, it’s totally possible to take out a card, use it for all your monthly expenses and pay the amount at the end of the month without a single rupee of debt left. However, this is not considered to be a very responsible approach.

A Credit Card is not to be used like a Debit Card. Essentially, the money spent through a Credit Card is ultimately a borrowed amount which ought to be paid back in a certain frame of time or paid with a heavy rate of interest attached at a later date. Therefore, never commit the mistake of using a Credit Card for day to day payments and result to a situation of carrying larger and larger monthly balances over time. If such a faulty act could get you into a spiral downfall at the financial front or not, depends on the choice of your Credit Card.

•  Choosing the right Credit Card for yourself

Many might pay no heed to what their choice of Credit Card ought to be. However, choosing the wrong Credit Card could also be one of the many reasons why you’re stuck deep neck in debt. Each and every Credit Card company offers a set of benefits and if used well, could be extremely advantageous for you in the long run.

As just a little example, you might have grave love for eating out. A Credit Card such as Indian Oil Citi Platinum Credit Card offers Upto 15% savings at participating restaurants ( all those restaurants the card is tied up with) and thus would make for a Card to perfectly suit you.

On the contrary, a Credit Card such as HDFC Bank Diners Club Black Credit Card would not be suitable if you barely make travel plans or go on lavish excursions.

Hence, it’s a great idea to first understand what you truly need and then explore all the Credit Card options that may best fit those needs. In case you’re trying to figure out what Credit Card might suit you perfectly here’s our guide to The Top 5 Credit Cards in India. Another great way for you to explore libraries of Credit Cards is to visit Aggregator websites. These sites help you decide amongst a wide range of cards.

• Maintaining your payment status

A dwindling Credit History (an evaluation of a borrower’s repayment of debts in a responsible fashion) can be responsible in preventing you from seeking any form of credit. If you can understand your spending habits and suspect that you’ll need to run a balance on your credit card at some point, look for low-interest products that offer special introductory rates. That way you can protect yourself from a situation where not only were you unable to pay the whole amount on time but have to now pay a much bigger price for the amount that you borrowed.

A wonderful way to demonstrate your creditworthiness is to deflect unnecessary interest charges by paying your credit card bills each and every month and on time. Well it’s not just keeping on top of your bills that can be helpful in the long run. What’s even better is that this would result in improving your Credit Score with each passing fulfilled payment making you eligible for cash-back or rewards associated with your choice of Credit Card. And now instead of owing money, you’d be making money. Furthermore, there are usually no limits as to how much cash-back you can earn which is a huge plus.

• Pay off high balances on first priority

Discipline is the first and foremost rule to financial management. Once you’ve figured out the Credit Card that works well for you, keep that Credit Card safe. By safe we mean not giving into your fancies and indulging in an expensive, unnecessary and frivolous purchases. Unless you are confident enough to pay back every penny after your pay-check clears, do not purchase something that will surely get you in debt. Lack of judgement to pay on time should make you take a step back and re-evaluate your financial choices.

Going the minimum payment route on the contrary, to repay even the most subtle of balances in full can take years and cost thousands of rupees only in interest payments. Which will ultimately fail our end goal of efficient Credit Management. Therefore, carrying any debt to demolish at a future date is not a very bright idea.

Ensuring healthy spending habits is the key to good Credit Management. This will show that you can successfully manage your credit limit, minimizing the chance of increasing interest rates or reductions in credit limit. Proper credit utilization can also help improve your creditworthiness.

• Keeping your Credit Cards active

Many Credit Card companies have begun to incur inactivity fees on their respective cards. Therefore, actively using your Credit Card over the minimum limit is a wise thought. In case you already have a huge pending debt, ensure to only meet the minimum amount and not fall further into the debt spiral.

Lenders don’t just loan you money without some prior knowledge of your money spending habits. It is essential that your actions are well thought out since one mistake can impact your Credit History and directly hurt your Credit Score. To learn more about how to measure and keep your Credit Score in check, read our article on Credit Score : A complete guide to your Creditworthiness.

We understand how one poor credit decision can completely ruin your financial reputation and make it tough or even next to impossible to borrow any more funds by traditional means. Following our step by step guide will definitely help you sleep better knowing you will solve the issue of weighing debts one way or the other. Make sure you read the terms and conditions and seek out loan terms favourable for you and pay off your hanging credit balances as soon as you can.