A credit score is your credit history expressed as a number. You can also think of it as a grade for how responsibly you’ve managed loans, lines of credit and other financial obligations over the years. While having a good credit score can help you get loans easily and in general make your life much more easier and accessible in the future, having a bad credit score can cause serious harm to a peaceful future!
Always Strive to never miss a payment
Do you know that your payment history accounts upto 35% of your credit score. Making payments on time is the easiest way to ensure that you build a positive credit history. A record of on-time payments is a key factor in a positive credit history. Just keep your spendings under control. Spend only what you can afford to repay in full or EMI each month.
Don’t apply at too many lending platform at once
Once you do have access to credit, don’t apply at too many lending platforms with abandon. Your credit scores take a small hit every time there is a hard inquiry (i.e how many times you have applied for credit in past 12 months) on your credit reports, which occurs whenever you apply for new credit.
Keep your credit utilisation ratio at optimum level
Your credit utilisation ratio is the amount of credit you use on a regular basis compared with the amount of credit you have access to. To calculate it, look at how much is your EMI/month, then divide that into the total credit limit.
Do you know that it’s a golden rule to maintain credit utilization ratio below 30% for a good credit score & 10% for a very good credit score. If your utilization ratio is too high, there are two ways to improve it: Lower the amount of money borrowed by you each month, or increase the amount of credit you have available to you.
Monitor Your Credit
You can do everything right—But identity theft, financial fraud and credit-report errors can rear their ugly heads at any time. You are entitled to one free credit report each year from each of the three credit bureaus, so you should be reviewing them to make sure they accurately reflect your credit behaviour. Trouble your lenders if they have not reported your loans properly & precisely on time.
Now that you know how to build credit from the scratch, it’s time to go out and do it. If you follow these tips, you’ll be setting yourself up for a brighter financial future.