Credit is a big topic and is a highly essential one. Before knowing the relation between credit cards and credit health, first, let us be clear on what are credit cards and what is credit health? Then, we will identify the relation between these two. Credit cards are issued by financial institutions. This card provides customers with a pre-determined credit limit that they can use for payment during a purchase. Also, there is no need to pay cash or issue a check when using a credit card.
Credit Card
The financial institutions decide the credit limit of credit cards. Usually, they are based on the customer’s credit score and monthly income. Credit cards are issued by credit lenders, banks, or building societies. This card will provide you the access of your credit which you can spend on purchases, earn the rewards, and also reduce debts.
In recent times, the credit card has become a famous financial instrument in the world. The amount of credit cards that are issued globally is growing, as many people are relying on debt. Thus, instant credit-based transactions are done using these credit cards. By using a credit card you can borrow a certain amount of money and then make repayments later in EMIs. Credit cards are very essential but need to be handled with precaution.
Try to save more money on selecting the right credit card. Also, some cards provide flexible payment options, provide travel rewards, cash back, and other benefits. There are four ways by which you can apply for a credit card. One can apply over the phone, online, in the branch, and through targeted mail offers.
Credit Health
Credit health is an insurance policy that protects the creditor when the borrower is not able to pay his debt because of medical issues or disability. Such policies were issued along with credit cards. Credit health is determined by financial actions. There are few things which can affect your credit health:
- Paying bills in full and on time
- The type of credit account you have
- Information on public records like judgments and bankruptcies
- Your credit history length
- Credit utilization ratio, this ratio is the exact credit that is available and credit you had utilized till now
Relation Between Credit Cards and Credit Health
Credit monitoring allows in updating your credit scores and credit reports regularly. Thus, progress in your credit can be watched through this credit monitoring. After this credit monitoring is done you can start to improve your credit health by taking necessary actions. Always remember that credit never dies and there are possible ways to improve your credit health.
When you work towards increasing your CIBIL score, then you can easily increase your credit health. Most of us never know the importance of a credit score and you need to understand debt-to-income ratio. When your debt-to-income ratio is balanced it means you have stronger credit health. If the DTI ratio is 50% or higher than it shows that person has a problem in making payments. Your account age and a consistent pattern of timely payments are the indications of good credit health.
You can use your credit cards properly for getting optimum credit health. The best way to maintain your credit score healthily is by making your credit utilization ratio below 30%. Thus credit card usage affects your credit health when you keep on spending beyond your credit limits. When you plan to close your credit card account, it can slightly affect your credit score.
Many credit cards need a very good credit score; 750+ is said to be the excellent credit, while 700-749 is said to be good credit while 600-699 is the average credit. Management of less debt for a long period of time could keep your credit health better.
