Credit cards can be a boon especially if used and maintained in the right way. Especially for people who want to keep a good credit score. A good credit rating with the bank and managing credit cards will help go a long way as there are many benefits as one might be aware of by now. However, it requires a lot of discipline from cardholders. There are a few reasons listed below, which one may want to consider in order to keep a good rating.
- Loans are generally given to individuals who have a good credit rating with the bank as the interest rates are directly dependent on the credit scores of an individual. Since lending is done at the sole discretion of the bank, it is important to show the bank that the individual is eligible for the loan. As it is applicable to home, auto, as well as personal loans, having a good credit rating will help save huge money. For instance, keeping the credit score high will get compensated by the thousands of dollars that one could save on making a fresh car purchase.
- Except in cases of bankruptcy or foreclosure of a loan, debts on credit cards are the single most important factor on the credit report of an individual. If cards are not managed well, the penalty charges could well exceed the amount that was borrowed. Though the recent law has put caps on interest rates, the penalties are still quite substantial in cases of defaulting payments.
- There is every chance that one's prospective employers, auto insurance agencies, land owners etc have checked on an individual's credentials. It pays to keep a good credit score as it affects more than just the loans one wants to avail. One might be unable to avail a home or auto loan just because of the late payments to the banks.
- Credit scores are not only impacted by late/missed payments but one has to ensure that only 50% of the available credit limit is used up and not the entire amount. This would mean good management with the credit card.
- It is also advisable to move out of bad credit as soon as possible. Even though it is tempting to pay just the minimum due, it always helps to pay a bit more and clear the debt earlier and get into good credit. Even a small increase in payment can aid in getting out of debt much earlier.