You may have a dream of buying your own home. To buy a home you may need to avail a home loan. Your intention should not just be availing a home loan to buy a home; instead, you should have a goal of availing the home loan at an attractive interest rate. To avail a home loan at an attractive interest rate, you must have a good credit score. Lenders usually offer home loans to citizens with a credit score of more than 700. You cannot build a credit score overnight. You can build a good credit score by repaying all your loans on time. If you use your credit card carefully, it can help you get a home loan at a lower interest rate. This is how a credit card can help you get a home loan at an attractive interest rate.
Pay your credit card dues on time
You must always pay your credit card bills on time. Doing so can help you improve your credit score. In case you miss out paying your credit card bills, your credit score will be badly affected and you will be charged interest on the outstanding amount due. If you pay the minimum amount due to avoid late payment penalty, the bank may not consider you as a defaulter, but you might struggle with repayments.
Have low credit utilization ratio
Every credit card will have a credit limit which is the maximum amount you can spend using your credit card. If you use the entire credit limit available, your credit utilization will go up. High credit utilization will affect your credit score. If you have high credit utilization, banks will assume you are credit hungry. It is always advisable to maintain a credit limit less than 40% as low credit utilization will help you increase your credit score.
Use the same credit card for long periods of time
Do not close your old credit card accounts because credit score gives more weightage to older credit accounts. If you keep using your old credit card and pay all your dues on time, your credit score will improve over a period of time.
Be careful when you avail loans on credit card
Many citizens avail loans on credit card as the interest rate is less when compared to a personal loan. Availing loans on credit cards blocks your credit card limit. When you avail loans on credit cards you must repay them on time. In case you miss the payment, your credit score will be badly affected.
Do not ignore disputes with your lender
Many citizens who are not happy with the services offered, stop using the credit card, without paying the outstanding dues and formally closing it. This will have a bad impact on their credit score. So if there is any disputed transaction or a charge on your credit card, speak to your credit card issuer and get it resolved.
If you use your credit card carefully, your credit score will improve over time and you will be offered loans at an attractive interest rate.