5 habits to maintain a healthy credit score

Credit score is a three-digit number that stands for your creditworthiness. This means it is used to determine your creditworthiness for loans and credit cards. It also plays a major role in determining your loan terms. So, the interest rates offered, and the repayment standings are all based on your credit score. Creating a credit history is easy. It is important to have a score in place, you should continuously keep a tab on its progress. Once you build your score, you must take measures to maintain it as well.

Discipline and sincerity go a long way when it comes to maintaining good financial health, whether it is your investments or the lines of the credit that you pick. Let’s look at a few of the time-tested habits that lead to good credit history, and hence can lead to a good credit score.

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Make regular and timely repayments as scheduled
The first element you need to succeed in your financial responsibilities is to maintain a regular repayment schedule. Many people set up calendars with important dates and due amounts marked on it. This gives the borrower a clear number to be set aside each month for their credit card dues and loan EMIs. Individuals often find themselves struggling through the month due to a lack of planning and mismanagement of funds. Once money is set aside basis the priorities, you can be at ease for the rest of the month as the bills are taken care of.

Run regular checks on your credit utilization
Avoid showing a credit hungry behavior by keeping a check on your credit utilization ratio. This ratio is not just for your credit card, but your overall credit limit which includes your loans and credit card limits together. The ideal credit utilization ratio is 30% which means if you have a credit limit of INR 1 lakh, then utilizing up to INR 30,000 will not depict you as a credit hungry borrower.

 A regular behavior of high credit utilization may show a credit hungry behavior and adversely affect your credit score. In case you have spotted a drop in your score due to this reason, you can approach your card issuer and request to increase your credit limit or get another credit card. You must ensure that you keep a track of your expenses. A second card will increase your credit limit and fix your credit hungry rating only if you properly take care credit payments

Double check loan deeds and lease before co-signing
People often co-sign deeds and documents as a co-applicant or a guarantor for someone to help them achieve their goals. It is important to understand that their activity on those co-signed documents can affect their credit health too. The documents signed are usually for family members or partners and friends where trust lays the foundation for your decision. It is wise to enquire borrower’s credit history before deciding. Even if the score is good, make sure that they are making timely repayments for their loan EMIs and credit card dues.

Make enquiries for credit wisely
Every time you enquire about a loan or credit card to your banks, they get your credit score to evaluate how well you have handled credit until then. This activity is considered as a hard inquiry which when overused has an effect on your credit score.

You can check your own credit score directly with the bureaus. These enquiries are considered as soft enquiries which don’t pull down your credit score. Alternatively one can visit financial marketplaces to compare different kinds of loans available for you and choose the most suitable ones if you decide.

Keep a regular tab on your credit score
Credit reports are as susceptible to identity thefts and frauds as anything else. A credit report is a history of all your credit accounts, right from your loans to credit cards. It includes everything from your settled and closed accounts to those that are currently running.
One should check their own credit report and score with the bureaus to ensure that all the data are correctly reported by lenders and depicted in the credit report. Any dispute on the same should be raised with the credit bureaus or respective lenders for correction.

(By Wilfred Sigler, Director & Sales – Marketing, CRIF High Mark)