Poor Credit Score

Smart Use of a Credit Card When You have a Poor Credit Score

Back in the day, credit cards were privilege of affluent people only, but presently you can find them as everyone’s cup of tea. Simple steps to follow and you will have your own credit card, the last resort to finance your short-term emergency needs.

Direct lenders will not disappoint you when you need funds urgently. Understanding that you can come across emergency even if your financial situation is wobbling, they will not denying lending money. As opposed to traditional lending systems, they will disburse money regardless of your credit history. You can apply for no guarantor loans for bad credit, but you need to ensure that you are eligible to pay back whole of the debt on time.

Lenders can restrict the disbursal limit if you have a very poor credit report. In such a case, you might need to put additional efforts to arrange funds. You use your credit card as it gives a few advantages over your debit card. You can perform transactions when your account is running out of money and you can cancel the transaction if you have not got your product delivered on time.

However, you have to be wary of using your credit card. If you fail to clear all your dues on time, your credit utilisation rate will go up and at last, you will end up with very poor credit score. So how should you use your card smartly? Here are the ways.

Choose your card wisely

 Credit card wisely

Loan companies offer various types of credit cards such as balance transfer cards, standard cards, low-interest credit cards, travel credit cards, 0% balance transfer credit cards, cash back credit cards and credit cards for a bad score, and so forth. Each card has its own features, so you should choose the one that suits your needs. Ask your lender to inform you of the features of each credit card before you select any.

Pay bills on time

Credit Card Payment

Credit card companies provide a fixed period so that you can pay back all your bills. This period usually comes with interest-free facility and hence you do not need to pay interest. Credit card bills are generated when the amount stays pending even after the due date and it results in high late payment fees and additional interest. So make sure that you pay on time. Timely payment will help you maintain your good credit score. 

Maintain discipline

Credit card Maintain

Though a credit card gives you liberty to spend, you should realise that it is ultimately your out-of-pocket expense. You should generally say NO to your card use. The more you avoid using the card, the better. If the use is urgent, make sure that you have not consumed more than 30% of your limit, otherwise, the lender interprets that you rely on borrowings for your expenses. Further, set aside money for clearing card bills. If you think you will fail to withstand the temptation of using that money, you should settle your account immediately.

Try to grab a lower card limit

 Credit card limit

Before you apply for a credit card, you should ask your lender for a lower limit. Cards with higher limits cause overspending because you have more freedom to spend. However, these cards are benign if your financial position is sound and stable. Otherwise, you will end up with huge debts. The direct lender can help you avail very bad credit loans to pay off your outstanding bills, but they come with high interest rates, which more often than not cause difficulty paying off debt.

Manage your debts

Bad Credit People

If you already have credit card bills pending, you should make a realistic budget to cut down on your expenses. Pay your debts on time. If it seems difficult to manage due to handling multiple debts, you should set an automatic-debit mode so that you can pay your outstanding dues right after you receive funds in your account. In the case of multiple debts, you can also plan to consolidate your card balances. This will help you pay all of your dues without interest. However, make sure that you pay back within interest-free time. Otherwise, you catch extremely high interest rates.

Avoid having multiple cards

It is not dangerous as long as you have two to three cards, but the fewer cards you have, the better. With fewer cards, you will not be able to make lots of purchases. It will reduce your tendency to buy on credit. Moreover, you should use your card only in case of emergency. Instead, you should use cash or debit card for your regular expenses.

Direct lenders undoubtedly do not deny giving you a helping hand when you need funds. In fact, they charge no broker fees, but you have to be careful with utilisation of your credit card. The ground rule is that pay all your bills on time. This will not only help you prevent from a debt spiral but elevate your credit score also.

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