The economy is turning cashless and the dependency on plastic money has been rising drastically. Debit and Credit Cards are used by almost everyone and have become one of the most convenient modes of paying money. Credit cards, especially, offer the choice of buying now and paying later which eases your shopping and payment activities, thus, making your financial activities more flexible.

However, it is very important to use Credit Cards wisely. They have a direct impact on your CIBIL Score which is directly related to availing of loan facilities. If you use your Credit Card in the right manner, you will be able to maintain a good CIBIL Score, thus, more ease in getting loan approvals at a better rate of interest. We shall discuss in detail the impact of Credit cards on credit scores.

What is a Credit Card Limit and What is a Credit Card Overlimit?

Your credit card limit is the maximum amount you can spend with your card at any given moment. This limitation is in place to prevent people from getting into unmanageable levels of debt. Credit limits are established based on several criteria, including but not limited to, a borrower’s income, credit history, creditworthiness, etc. 

Typically, a credit card’s limit is established when the card is first issued, but it may be increased or decreased over time based on the cardholder’s payment history, credit score for credit cards, income bracket, etc.

A credit over-limit occurs when a cardholder incurs charges over their available credit. Every credit card holder has the option of going above their credit limit. You may choose to either abort the transaction that exceeds your credit limit or proceed with it over the limit.

Requirements for Credit Card Applications Based on CIBIL Minimum Score

Your CIBIL score for your credit card needs to be somewhere between 300 and 900. Anywhere between 700 and 850 could be considered an acceptable CIBIL score for smooth loan approvals at a good rate of interest. The majority of financial institutions analyze a customer’s credit card usage and accept their credit card application if they have a CIBIL score between 700 and 750. 

Does Credit Card Affect Credit Score?

The following conditions or practices affect your CIBIL score on credit card: 

Your credit card’s payments history

Your payment history is the single most important component in determining your credit score. A significant portion of your credit score (almost 35%) depends on this. Make regular payments to your credit card bills to keep your credit history spotless. However, if you don’t pay your credit card bill on time, you’ll be hit with higher interest rates and a late payment fee—along with the additional blow of a slashed CIBIL score. 

Excessive use of credit limit

Excessive credit use might harm your CIBIL score if you use more than 70 or 80 percent of your available credit at any given time. The health and growth of your credit rating depend heavily on your timely repayment of debts. You will see a negative impact on your CIBIL score as it will decrease after you miss even one EMI payment. 

For instance, when someone has a high utilization rate, it shows they can’t keep their expenditures in check. Credit limits are also determined by an individual’s income at several credit card issuers. Too much credit usage is a red flag for financial institutions, who may determine that you are carrying too much debt.

Not paying the minimum amount due

Credit card holders should always pay at least the minimum payment due, if not the entire balance, to maintain a steady CIBIL score. Remember that making only the minimum payment (also known as MAD) on your credit card balances won’t have any negative effect on your ability to make future payments. 

Making MAD is not a default, but interest and other fees, if applicable, will accrue on the outstanding balance. A credit card is a wonderful time-saving tool since it enables you to buy everything you want immediately and pay no interest for up to 45 days for it. Making prompt and complete repayments is the sole concern one needs to have to avoid interest and fees.

Maxing up your credit even if it was avoidable 

Calculating your credit utilization ratio (CUR) each month can give you an idea of how much you are spending compared to your available credit. Let’s say you have a Rs 1 lakh credit limit but only managed to spend Rs 90,000. Your CUR will be 90% in this scenario.

The perception of a borrower with a high CUR is one of excessive credit consumption. Your credit rating will drop as a result. Temporary overspending on essentials is acceptable in times of need or for major life events like weddings or international travel, but you shouldn’t make it a habit. 

Maintain a minimum of 30% CUR. If you have bills to pay, you should pay them in full and on time every month. It’s not worth the incentives and savings if you have to pay interest on your regular purchases. If you pay on time and in full, you can increase your credit limit and get lower interest rates on loans.

Missing payments 

Avoid missing payments by setting up automatic withdrawals, even if only for the minimum amount. The term “automated payment” refers to the practice of setting up a recurring electronic funds transfer from a credit card account to a supplier, biller, or merchant. The biller will automatically collect the payment owed by the agreed-upon payment terms.

Filling out a bunch of credit applications at once

Users should avoid making numerous credit applications at once to take advantage of the offers, discounts, and grace periods on each credit card. A lower credit score is a common outcome of excessively applying for loans. You shouldn’t have more than three credit cards at any given time. 

Reaching credit limit

Once a person reaches their credit limit, further credit card purchases will be rejected. Be aware of your credit card’s limit and monitor your balances regularly to avoid being caught off guard if you charge more than you can afford to pay off in full before the end of the billing cycle.

The Bottom Line

Changing your approach to money is crucial if you want to raise your credit card CIBIL score. Avoid missing payments on your credit card bills by reviewing your statements periodically. Keeping up with bill payments is one surefire way to improve one’s credit standing. Business loans, micro, small, and medium enterprise loans, collateral-free business loans, term loans, small business loans, etc., are just a few of the top loan services Flexiloans offers to budding entrepreneurs and small businesses. Visit our website today to know about the eligibility for business loan and the interest rate for business loans. 

If you’re looking for more informational blog posts like this one, check out the ones we have here at Flexi Loans.

The post How Do Credit Card Payments Impact Your Credit Score? appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.

Suppose you’re in the market for a business credit card. This blog post will share tips on getting a business credit card and using it responsibly.

What Is A Business Credit Card? 

A business credit card is a type of credit card specifically designed for businesses. Business credit cards offer some benefits and features that can be extremely useful for businesses, including the ability to help manage cash flow, earn rewards, and get discounts on business expenses.

If someone is a small business owner, they may wonder if using a credit card for business is right. The answer depends on a few factors, such as how they will use the card and whether they can qualify for a business credit card.

How To Get a Business Credit Card? 

If you are thinking about getting a business credit card, here are a few things to keep in mind:

1. Know Business Credit Score

One of the first things you’ll need to do before applying for a business credit card is to know your business credit score. This score is similar to the credit score and is used by lenders to determine someone’s creditworthiness.

A few things can impact a business credit score, including payment history, credit utilization, and the length of someone’s credit history. With a strong business credit score, they’ll be more likely to get approved for a business credit card with favorable terms.

2. Choose the Right Business Credit Card In India 

There are several different business credit cards available on the market, so you must choose one that best meets the needs of your business. When selecting a business credit card, consider factors such as the rewards program, interest rate, and features/benefits.

For example, if someone often travels for work, they may consider a business credit card in India that offers travel rewards. Or, if someone is looking to finance a large purchase for their business, they may want to choose a business credit card with 0% APR for an introductory period.

3. Gather all the Documents Required For Credit Card

When you’re ready to apply for a business credit card, you’ll need to gather some required documentation. This will typically include the company’s tax ID number, financial statements, and proof of income.

Some business credit cards may also require a personal guarantee, which means they will be personally liable for any debt incurred on the card. Be sure to read the terms and conditions of the card before applying to understand what’s required.

4. Compare Business Credit Card Offers

Once you’ve gathered the required documentation, it’s time to compare business credit card offers. There are different factors to consider, such as rewards programs, interest rates, and fees.

Make sure to read the fine print of each offer to know exactly what you’re getting before applying. It’s also a good idea to check with an accountant or financial advisor to see if there are any tax implications associated with the business credit card you’re considering.

5. Apply for the Business Credit Card

Once you’ve selected the right business credit card for your needs, it’s time to apply for a business credit card online which can typically be done in a few minutes. When applying, be sure to have all of the required documentation on hand.

Once you’ve applied, the issuer will review the creditworthiness and decide. If approved, you’ll typically receive the business credit card within a few weeks.

How to Use a Business Credit Card Responsibly? 

Once a business credit card is approved, it’s critical to use it responsibly. Here are a few tips on How to Use Credit Cards for Business:

– Keep business and personal expenses separate: One of the benefits of having a credit card for business is that it can keep business and personal expenses separate. This will make it easier to track the spending and stay organized come tax time.

– Pay the balance in full each month: Business credit cards often come with high-interest rates, so paying the balance in full each month is essential. This will help avoid paying interest on the purchases and help keep the business finances in order.

– Use the rewards wisely: If the business credit card offers rewards, ensure that you use them wisely. For example, if there is a cashback card, use the cash back to pay down the balance or reinvest in the business.

Apply for a business loan from FlexiLoans and access quick and easy financing. With our simple 4 step process, you can get your loan approved in no time. Track your loan application status, pay your EMI quickly and get the funding you need to grow your business. !

Conclusion

A business credit card can be an excellent tool for businesses of all sizes. If you’re looking to get a business credit card, be sure to follow the tips outlined in this blog. Doing so will increase the chances of getting approved and finding the right card for the needs.

The post How to Get Your Business Credit Card appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.

Avoid Defaults

Your bid for a quick business loan can take a beating on account of payment defaults so make sure that all your monthly bills are paid by due date. Remember that even if the default is not because of a cash crunch, it shows up on your credit report and reflects in credit score. You do not want to lose out on a loan because you forgot the due date!

Stay Updated

Do not make the mistake of checking your credit score right at the time when you are in need of small business loans. This adds to unnecessary inquiries in your report. Keep yourself updated by reviewing your credit score every six months. The advantage of this exercise is that in case there is any negative remark, you can find it easily and counter it if it is not correct. Also, if you find the score going down, then steps can be taken in time to strengthen it.

Reduce Credit Card Utilisation

When it comes to credit score, there is a simple rule to follow- always keep your utilization percentage limited to thirty percent of the total limit. Follow this rule for every card you have. Also, it is advisable that you do not use all credit cards as it reflects that you do not have enough amount to meet your monthly expenditures. It also showcases spending habits, something you would want to keep to yourself. To enforce discipline, you can ask your credit card company to send an alert when you breach the utilization limit.

Mind Your Loan Applications

While it is a common practice to make multiple loan applications to various lenders, this seemingly gullible practice might be hurting your financial credibility. Multiple loan applications show up in your credit report and are not viewed kindly by lenders. If there are too many rejections, chances of getting a quick business loan get slimmer.

Joint Application Trap

A joint application of loan helps in increasing the chances of getting a loan, but it can prove detrimental to your credit score. If there is a default owing to a mistake by the joint borrower, the lack of credibility will affect your future capability of getting a loan as well.

Apply for Unsecured Loans

You can improve your credit score by availing collateral free business loans from online financing platforms such as FlexiLoans. When you take secured loans, you not only mortgage your assets but also increase the risk of default on repayment. However, it is easier and quicker to pay off collateral free loans, as a result of which your credibility as a borrower increases.

Since creating a favorable credit score is a long process, the ideal way to keep your credit score intact is to follow financial discipline.

Also Read: SUPER USEFUL IDEAS TO MAXIMIZE YOUR SALE THIS DIWALI

The post 6 WAYS TO KEEP YOUR CREDIT SCORE INTACT appeared first on FlexiLoans Finance, Business Loan Blogs, Tips & Guide.