The circulation of credit card is increasing and many people use it. There are many people who keep their credit card balance zero. Are you one of those people who keep their credit card balance zero?
If so, then also know about its disadvantages.
After spending the entire limit of the credit card, the balance becomes zero at the end of the month. This affects your credit score. It is believed that the card holder is too expensive and the account of the card may also become inactive. With zero balance, it is also believed that the cardholder is facing some financial problem.
Balance zero effect
Banks can reduce the credit limit if the credit card balance is low because they feel that the cardholder may default in future. Lowering of the credit limit affects the credit score and it starts decreasing. This is due to the credit utilization ratio and this ratio is considered correct when it is 30 percent.
Be careful when spending with credit cards
Let us understand the credit utilization ratio with the help of an example. Suppose your credit card limit is 1 lakh rupees and you spend 30 thousand rupees every month then it is good. But spending more than this can affect your credit score. If this ratio is less than 30 percent, then the credit score improves. That’s why you should spend your credit card wisely.
What is seen in credit score
- If you pay the entire credit card bill in one go, then your credit score remains correct up to 35%.
- Your credit history also plays a role of 15% in your credit score. That is, in how many days you pay your credit card bill, the score also depends on it. If the credit history is longer then it is considered good.
- If you take more credit then it can reduce your score, but it plays a 10% role in the overall credit score.
- If you take a loan on a credit card to pay the bill for any goods, then this also affects the credit score.
- The credit score should not be kept at zero for a long time as banks make the card inactive due to which your credit score can go negative.
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