Credit score is nothing but a measure of your credibility when it comes to paying off your debts such as loans or credit card debts. In India, the most popular one is the score provided by CIBIL (Credit Information Bureau India Limited) in association with TransUnion, a global credit reporting agency. CIBIL is entrusted with maintaining the credit information of all past and current banking clients in India who have availed loans or credit cards. This is done through Credit Information Report (CIR) data that banks provide to CIBIL from time to time. The following are some ways that you can achieve and maintain a good credit score and a clean credit report.
Pay Your Credit Card Bills/Loan EMIs on Time and in Full
There are times when financial circumstances put you in a tight spot and you might plan to postpone your monthly credit card bill or loan EMI payment. That’s a big mistake because you risk messing up your credit score. Remember, every credit card bill and loan EMI payment is on the CIBIL radar and non-payments or late payments are reported by the lender to CIBIL. Next time instead of missing your monthly payment, better compromise with your lavish holiday outing. Stick to paying your credit monthly bills/installments on time and in full. This is a basic ingredient for maintaining a healthy credit score.
May Be You Don’t Need the Extra Credit
Figure out your needs and their affordability. Though there is a great amount of literature on financial planning available online, the bottom line is ‘Don’t spend more than you earn’. It’s simple as that. Evaluate your expenses and you might realize that many of them were not actually called for. Availability of credit is an excellent facility but if you don’t use it judiciously, it can land you in trouble. Don’t seek credit or go into debt for anything beyond what you need. Save it for the most important necessities. Postpone your desires if you can’t afford to pay your EMIs instead of carrying multiple loans or a credit card balance that can adversely affect your credit score.
Must Read: Factors that Affect Your Credit Score
Debt comprises all kinds of loans or credit card debt. Be it home loan, personal loan or the loan on your credit card or even credit card balances. Carrying a large credit card debt or multiple loans is a bad idea as it makes you look credit hungry. Eventually you are accumulating debt that hurts your credit score. Always aim to minimize your debt while optimizing your payments. Managing debt effectively will boost your credit score.
Check your Credit Report Periodically
Your credit report is a historic record of all your debt instruments and the credit score is a result of a minute and precise statistical calculation on the basis of your credit history. You can’t manually compute it at home. So keep a close watch on your score time to time. This will help optimize your credit management capability and warn you of fraudulent activities on your credit card or loan account. Additionally, there is the possibility of errors in your credit report, which can hurt your credit score. By checking your credit score periodically, you can get these rectified and maintain your credit score.
Avoid Impulse Purchases using your Credit Card
Credit cards are a very convenient and secure alternative to carrying around a thick wad of cash. However, this convenience can be greatly tempting and can lead to impulse purchases. Practice caution when availing any credit through your credit card. All you need to do is just swipe it, but you may have to pay through your nose if you have not evaluated your repayment capability. Additionally, if you carry a debt on your credit card, that also hurt your credit score. Thus, judicious use of credit cards is the best way to maintain a good credit score.
Don’t Use more than 30% of your Credit Limit
Your credit limit is a convenient option but availing the entire limit adversely affects your credit score. Your credit report is not only based upon your timely bill payments, but also on how much of limit have you availed. Experts say you must not use anything more than 30% to 40% of your credit card limit otherwise you will appear as a credit hungry individual and your credit score will bear the brunt of your excesses.