Are you a credit healthy person? sticking to good financial practices will make you a credit-healthy person. It also aids you to build your credit score and maintain the good credit profile. Remember that a good credit profile pulls the lender to offer credit. Maintaining a good credit profile by just having a credit footmark is not enough, You have to take credit and do timely repayment to enhance credit records. A credit record is essential as it is the base point of your credit score. Simply speaking, a credit score portrays your credit history & behavior. Maintaining good credit habits will help you to create a favorable credit profile, and credit bureaus like TransUnion CIBIL™ will allot a good CIBIL™ score to your profile.
Always remember that obtaining a High CIBIL™ score is possible only with cautious credit usage. Alternatively, if you have a Bad CIBIL™ score, it will negatively portray your ability to handle credit. The lender will look into your CIBIL™ report to learn about your repayment capability, financial habits, and more, before approving any loan or credit card application. If you have a good CIBIL™ score, the lender will show a green signal during the assessment. In the case of a bad CIBIL™ score, he will raise a red flag that results in the rejection of the loan application or providing credit with unfavorable terms like a high-interest rate. So you need to consider the significance of a healthy CIBIL™ score & credit profile by incorporating some good credit management practices.
Also Read: Credit Improvement Services
Let's have a speed read through the five habits to maintain a good CIBIL™ score and credit profile.
Often check Your Credit Report:
The first habit you need to follow to maintain a good credit score & credit report is to keep a regular eye on your credit. To know the consequences of your credit decisions, you need to monitor your CIBIL™ score and report online regularly. Monitoring often will aid you to track the changes that take place in your credit report. Nowadays, the process of checking your credit score is easy as you can use the free online CIBIL™ report to check your credit status online within a while. With free credit score check-ups, you can frequently check your credit status.
Maintain a Low Credit Utilization Ratio:
When you use a credit card, always be cautious about its total credit limit. Ensure to maintain a credit utilization ratio of 30% or lower than that to save your CIBIL™ score. If you exceed more than 30% of the credit utilization ratio, it results in a drop in your CIBIL™ score. A low credit utilization ratio indicates limited usage of the available credit. Also, the Credit scoring model considers you the best credit manager who keeps a regular track of credit spending without overusing the given credit limit. A good credit score will enable you to obtain additional credit like auto loans/mortgage loans/home loans. If you are unsure about your credit utilization ratio, you can check your CIBIL™ report and compute the value. It's always good to track your spending habits. If you find that the utilization ratio is exceeding 30%, you can limit your credit usage.
Also Read: Credit Score Simulator
Maintain a credit history without defaults:
Generally, tracking your credit repayment record is a significant factor in your CIBIL™ score. Ensure to be disciplined in your credit repayment because if you miss a single repayment installment, it may harm your credit score and credit report. Defaulting to pay back your credit will gradually decrease your credit score. Also, this is applicable for partial payments. Instead of defaulting payments, try to repay the entire amount due and not only a minimum amount. The outstanding amount balance will negatively reflect on your credit score and credit report. Always ensure to make the regular payment without defaults as it aids you to design a stable and healthy credit history. Consistency in credit score will help you to enhance and maintain a good credit score.
Avoid multiple loan applications:
When you apply for a new loan or credit card or any other line of credit, the bank or the financial institution you have selected will do an inquiry into your credit profile. If the lender inquires about your report, it will reduce a small amount of your credit score temporarily. Furthermore, these inquiries are recorded in your credit report. If you apply for credit with different lenders in a short time, each lender will conduct hard inquiries that result in multiple inquiries and cause a reduction in your credit score.
This includes a lot of drawbacks like
- If the credit score is reduced, it may stop the chance of getting qualified for a loan/credit card.
- If the lender finds numerous hard inquiries into your credit profile, they may consider you a credit-hungry person. Credit-hungry behavior is signified by poor financial health.
It is advisable to avoid multiple times of applying for loans and credit cards in a short span. If your application is denied and if there is no immediate requirement for new credit, you can wait six months before reapplying for any credit.
Also Read: Credit Health Report
Hope would have been conscious of the importance of following good credit habits to boost your credit score and maintain a healthy credit history. Always remember that a low CIBIL™ score brings a lot of complexity to get a credit on reasonable terms. Therefore, knowing how to check your CIBIL™ score & report details and taking remedial measures in case of error is essential. It will not only aid you to build a clean & healthy profile but also alert you to the early sign of fraudulent activity. Frequently checking & tracking your credit report on the CreditMantri website will aid you to know about the suspicious entries and take the required action before lasting a negative impression.
FAQs of Five habits to maintain a healthy credit score and profile
1:How to improve credit history?
You can boost your credit score by following a few financial practices like regular EMI repayment without defaults, often keeping an eye on your credit score, resolving the error in your credit score, and managing Debt -to- income ratio, and credit utilization ratio.
2:Why should I maintain a good credit score?
By maintaining a good credit score, you will be qualified for best interest rates and low finance charges paid on credit card balances, and loans. If you pay less interest, you can quickly repay your debts.
3:What are the important parts of a credit score?
The most important part of a credit score is the Payment History. It occupies 35% of your credit score.