The credit score represents the creditworthiness of an individual. Or in other words, it is the measure of an individual’s ability to repay the credit. It is a three-digit number, which ranges from 300 to 900. Nine hundred being the highest, one should always try to maintain a credit score close to that. Having a good credit score is very beneficial for an individual and helps in enjoying lower interest rates on loans and while you avail credit cards. Using your credit card wisely and responsibly can help you maintain a good credit score. Also, it is important to undertake a regular credit score check to maintain efficiency. However, some people mismanage credit, which leads them to a big pile of debts.
How you can maintain a good credit score
A credit score plays a vital role in determining interest rates while taking a loan. Your credit score reflects your debt repayment ethics. Therefore, your credit score also helps to ease the loan approval process. You must take the necessary steps to improve your credit score. Here are some tips that you must follow to maintain a good credit score without any hindrance.
Pay bills on time
The most important criteria to maintain a good credit score is to pay your pending debts on time because financial discipline helps to build a good credit score. Try to pay your credit card debt at least five days. In case you are paying with a cheque, then make payment at least before ten days.
Know the factors that affect credit score
When you know what factors are affecting your credit score, then you can focus on bringing up your credit score. Your credit score is primarily impacted by five pointers, namely, your payment history, level of debt, age of the credit, recent credits, and mix of the loans. It would help if you kept a strict vigilance on the following.
Keep your credit card balance low
As a beginner, you should choose a credit card with a lower limit, and you should not borrow up to your maximum limit. Because your credit utilization also affects your credit scores. It will help if you keep your credit utilization within 30% of your maximum limit.
Manage your debts
Don’t let your credit card bills or EMIs pile up, set important alerts, and pay your bills on time. This eventually helps to reach a good credit score.
Frequently check credit card report
When you check the credit card report often, then you can detect the attributes that are affecting your credit score. Hence, you can start working on them before it’s too late.
Limit the number of the credit card application
Applying for a credit card too many times can also hurt your credit score. So, it will be better to apply for a new credit card or credit account when it is needed.
Keeping old credit cards
Keeping old credit cards is very beneficial for maintaining a good credit score as they can show a more extended credit history.
Avoid taking unsecured loans
The credit card also falls under the category of an unsecured loan. Along with high credit card debt, when you apply for many other unsecured loans, then there are higher chances of rejection. It is better to avoid taking other unsecured loans while you already have high credit card bills to pay.
It is required that you keep a regular check on your credit score. You can maintain the record of your repayment history and also keep track of all your loans. This can be done quickly using online calculators without any cost. Keeping track of your credit history can help you to avail any loan without hindrance because credit score not only determines your credit history but also plays a significant role in availing any credit. While the CIBIL SCORE is dependent on a lot of factors, credit history remains one of the significant factors. For instance, if you decide to buy a house through home loans, it can help to improve your credit score, and the reason for the same is that the tenure for the home loans is significantly longer. Thus, following the tips mentioned above will ensure that you work accordingly to maintain a good credit score.