4 Ways To Make Credit Work For You

By Sahaj Palla

Credit has always been thought of as a tool that leads people to spend carelessly. Little has been spoken about the lives it has helped build and the advantages it offers. When used responsibly, credit is a financial tool that not only improves the quality of life but also aids in sustaining it.

However, like all good things, this doesn’t happen overnight. It takes a lot of patience and discipline to use credit to our advantage; this includes limiting credit spending and paying bills on time among others.

For credit to work for you, you need to master a few skills. Read on to know what they are and how you can become an expert with credit.

4 ways to make credit work in your favour


1. Plan your budget and stick to it

Your budget is the shield that will get you through almost all financial needs and wants in life, provided you wear it all the time. You can set a budget for your credit usage and stick to it, come what may. This will help you be on top of your spending and let you stay well within limits. Once you master this you can easily relate to what we are going to tell you in the next point.

2. Try to limit your credit spending to 30%

There are two reasons why you should try to be under 30% of your credit limit.

  • When you go above 30% of your credit limit you come across as someone who is heavily dependent on credit - Leading to a negative impact on your credit score.
  • Utilising 30% of your credit limit helps you be in control of your spending.

3. Pay your bills in full and on time

When you follow the above two points the third one comes easy. Always pay your credit bills on time and in full. This helps in levelling up your credit score and builds ‘trust’ with the lenders/banks. You will come across as someone who can be trusted with money.

Consistently ensuring the above will show your ability to expertly manage your finances and credit to financial institutions, who will come to you with more credit offers and options. This is why you should read the next point.

4. Choose the type of credit wisely

There are three main credit types, these include:

Revolving Credit: Credit that you use, pay back and use again; no fixed date for payments.

Instalment Credit: Also known as loans. You can borrow upfront and pay back in instalments.

Open Credit: Similar to revolving credit but with a fixed date for payment.

You will have to study all the pros and cons of the credit you choose in detail and then determine which one is right for you.

Take Away


When you use credit the right way, you will avoid falling into debt traps and remain eligible for borrowing even bigger loans. This comes in handy when you need financial support for those life-changing events, like building a house, going for higher education, and planning a wedding among others. On an ending note, always stick to the adage, “Never borrow more than you can repay.”

Disclaimer: The information in this article is compiled from various sources and is an opinion piece only. This is not to be taken as a substitute for professional advice on managing finances, reader discretion is advised.

Credit - What You Need To Know





Should credit reports be checked regularly?

Yes, it is a good habit to check your credit report regularly. This lets you know the current state of your credit score and what is affecting it. RBI has made it mandatory for credit bureaus in India to offer one credit report to consumers every year.

Should unused credit lines be closed?

Unused credit lines can be closed. However, we would not recommend doing so, as closing of a credit line affects your credit score. However, if you are paying a high annual fee for the credit line, it is best to close or cancel it.

Why is it important to pay credit bills / loan EMIs on time?

On time payment is necessary for two reasons:

1st – You can avoid late fee charges

2nd – Late payments impact your credit score and affect your ability to secure loans in the future. In some cases the credit provider also reduces the credit limit.

Can I have a credit score without credit / loan?

Your ability to pay / repay is what determines your credit score. Without a credit line you won’t have a credit score. To build a credit score try getting a credit line and make timely repayments.

Will a good credit score ensure that I get a loan instantly?

There is no guarantee that a good credit score will get you a loan instantly. This is because credit score is just one of many factors that determine your eligibility for a loan. Your profile, work experience, income, savings are some of them. However, maintaining a good credit score is crucial if you want to avail a loan.