Whether you already have loans, or just a beginner looking for the best credit cards in the market, you are probably aware of the importance of your credit score by now. 

Your credit score, a 3-digit number, indicates your credibility to the lending institutions. This score is what determines the loan amount, the interest rate, repayment tenure and other terms and conditions on your loan. 

So, how does one build their credit? How can you maintain a healthy credit history? How to establish a solid credit history?  Here are some simple tips;

1. Understand Your Credit Score

The first step towards achieving something is to understand how it works. So, understand how your credit score is determined, what are the factors that affect your credit score, what are the points considered by the credit bureau while fixing your credit score. 

Your credit score is a 3-digit number, marked between 300 and 900. The factors considered for your credit score are: 

  • Past payment history
  • Total amount owed 
  • Length of your credit history
  • Amount on new credits
  • Credit Mix

When you understand how these factors affect your credit score and work accordingly, it is easier to achieve the perfect credit score. 

Additional Reading: How To Build Your Credit Score From Scratch

2. Making Timely Repayments

This is a very simple but important step to be followed. Disciplined debt management is a must if you want to establish a good credit history. And the first step towards it is making timely repayments. Your repayment history shows the creditor how committed you are to repaying the loan. So ensure that you put reminders, or set auto-debit so that the payments are done on time. 

3. Control Your Credit Utilization Ratio

You might have a considerable credit limit on your credit cards, but lenders don’t want you utilizing all of it. They want you to maintain a healthy balance between your income and debt so that you can make the repayments comfortably. Experts suggest you maintain your debt at 30% of your total available credit. This looks good to the lenders. 

4. Put Some Thought Into Opening And Closing Credit Accounts

The current credit market is all about marketing. They are constantly offering upgraded loans and credit cards based on your income and spending habits. But every time you apply for a credit card or loan, your credit score is pulled up, which records a hard enquiry on your credit report. Too many hard enquiries are not good for your credit score. Likewise, old credit cards are part of your total credit availability. Don’t close them down just because you don’t use them much. Instead, do some minimum purchases and keep them active. 

5. Be Consistent With Your Efforts

Keep checking your credit score regularly. If you find any errors or discrepancies, get them rectified immediately. Find out where you are making mistakes and correct them to improve your credit score. 

A credit score is all about disciplined debt management. Making timely repayments and maintaining a good credit utilization ratio. This is a continuous process. Being lax even for a few months can have serious ramifications on your credit score. So, be conscious of your spending habits and credit usage, and be consistent with your efforts towards establishing a solid credit history. 

Key Takeaways: 


  1. Can I have a good credit score if I don’t use a credit card?

A credit card is an important component of any credit report. Credit cards give you revolving credit, which is a very good way to build your credit score. So, if you are being offered a credit card, take it. But remember to have a good credit utilization ratio and make payments on time. It is very easy to screw up your credit score when you don’t use your credit card properly. 

  1. How can I get my credit score?

Your Credit Score and Credit Information Report are generated by Credit Bureaus. There are 4 authorized credit bureaus in India; CIBIL™, Equifax, CRIF High Mark and Experian. An individual is entitled to get one free credit report in a year. You may choose any one of the 4 credit bureaus to request a credit report along with your credit score. Your credit report can be obtained either from the credit bureau's website or via CreditMantri. The protocol is straightforward; you just input your telephone phone, PAN number, and a few other information such as your name and email address. After that, the credit bureau will generate your credit score as well as a comprehensive credit report for your analysis.

  1. What is considered a healthy credit utilization ratio?

Your credit utilization ratio is how much of the available credit you have utilized on a regular basis. Experts suggest that maintaining a credit utilization ratio of 30% is good for your credit score. 

  1. What is considered a good credit score?

A credit score of 750 and above is considered a good score to land the best loans and credit cards. Such a healthy score will ensure that you get low interest rates with other benefits and value-added services along with your loans. This score differs from lender to lender but 750+ is a sort of benchmark across most lenders and you can safely assume that this score will get you a good loan for sure. 

  1. How long will it take to achieve a credit score of 750 and above?

A credit score is not something that you can achieve overnight. It is a process and the time taken differs from person to person. However, if you are building your credit from scratch, it may take you at least 3 to 4 years to build a healthy credit score. If you already have a credit history and want to achieve a high score, it may take anywhere from 4 – 8 months to achieve this. It is all about your payment history and credit utilization. 

  1. Can errors and mistakes in my credit report have an adverse effect on my credit score?

Definitely. Mistakes in your personal information like name, contact information or demographic details may not have any effect. But information like your payment history, income, outstanding amount and existing debts will have an adverse effect if they are incorrect. That is why you should check your credit report regularly and dispute any incorrect information to get them rectified.