Your credit score is an essential component of your financial health. It reflects your creditworthiness and plays a crucial role in determining your eligibility for loans, credit cards, and other financial products. A good credit score can help you secure favourable interest rates and access various opportunities.
1. Timely payment
The cornerstone of a good credit score is making timely payments on your credit obligations. Whether it is credit card bills, loan instalments, or other debts, paying them on or before the due date demonstrates your responsible financial behaviour. Late payments can have a negative impact on your credit score, so set reminders or automate payments to avoid missing deadlines.
2. Credit utilisation
Maintaining a healthy credit utilisation ratio is crucial for a good credit score. This ratio represents the amount of credit that you are using compared to your total credit limit. It is recommended to keep your credit utilisation below 30% of your available credit. For example, if your credit limit is Rs. 1,00,000, try to keep your outstanding balances below Rs. 30,000. This demonstrates responsible credit management and can positively influence your credit score.
3. Credit mix
Having a diverse mix of credit accounts can enhance your credit score. Lenders often look for a variety of credit types, such as credit cards, secured home/ auto loans, and collateral-free personal loans. By responsibly managing multiple credit accounts, you can showcase your ability to handle different types of credit, boosting your creditworthiness.
4. Length of credit history
Building a solid credit history takes time, so it is essential to maintain a good credit relationship over the long term. The length of your credit history plays a significant role in determining your credit score. Avoid closing old credit accounts, as they contribute to the overall length of your credit history. Keeping accounts open and active, even if you do not use them regularly, can positively impact your credit score.
5. Regular monitoring
Stay vigilant by regularly monitoring your credit report. Request a free copy of your credit report from credit bureaus like TransUnion CIBIL and carefully review it for any errors or discrepancies. If you find inaccuracies, report them immediately to the credit bureau for rectification. Monitoring your credit report allows you to identify potential issues and take corrective measures promptly.
Managing your credit score requires responsible financial habits and consistent efforts. By following this simple 'recipe' for credit score management, you can lay a solid foundation for a healthy credit profile. Remember to make timely payments, maintain a low credit utilisation ratio, diversify your credit mix, and nurture a long credit history. These practices will help you build and maintain a good credit score.
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So, take charge of your credit score today and embark on a path toward financial success with the help of the Bajaj Finserv Credit Pass. Enjoy free unlimited access to all Credit Pass benefits for the first year when you sign up today.
