People today give a lot of importance to their health where many people do regular exercise, follow strict diets and even go for regular health checkups. This is a testament to the World Health Organization (WHO), celebrating World Health Day each year on April 7th, the day of their founding.
In 2018, the theme is universal health coverage; over growing concerns about how healthcare should be able to provide for everyone on the planet. While there are many initiatives that do take precedence in addressing different aspects of health, here we are impressing you on another aspect: credit health.
To simply define it would be to call it as well being from the point of view of loans and credit cards or your past borrowings in general. How you handle your borrowings today will determine your future, much like physical health; how fit you are today helps you in the long run.
World Health Day is a good time to start knowing about your credit health and how you can be credit healthy.
How to maintain a good credit health?
There are some factors that affect your credit health – Payment history, credit usage, length of credit history, credit mix and types, recent credit enquiry. One needs to follow certain rules keeping in mind these factors to make sure you stay credit healthy.
Rule 1: Make your payments on time
This is one of the most important factor when talking about credit health. One should always pay their dues on time be it credit card bills or loan EMI. This shows that you are responsible when it comes to credit and will help with your future credit requirements. Any missed payments or late payment can cause your credit score to plummet.
Rule2: Never take just one type of loan
A credit mix is where you have a portfolio with different types of credit like credit cards, personal loans, home loans etc. In most cases having a credit card and personal loans is enough. This is show that you can manage different types of credit and are responsible.
Rule 3: Don’t close your long-standing accounts
If you have accounts like a credit card that you have been using for more than 5 years don’t close those accounts. This history is a testimony to your credit health of the past and a good one would sere you well in the eyes of the banks.
Rule 4: Don’t use the maximum amount of credit available to you
Credit utilization plays an important part in one’s credit score. If you continuously utilize the maximum credit for example in the case of a credit card, then it shows that you do not have control over your spends and that you are a high-risk borrower. Lenders will think twice before giving you a loan.
Rule 5: Don’t have a lot of credit applications at any given time
If a person applies for a lot of credit products at any given time, it shows that the borrower is desperate for credit. Lenders when they see such remarks on your credit report will reject your credit application which will affect your credit score. Also, when a borrower hard pulls a person’s credit report their score will see a slight dip. If the same happens many time the dip could be significant.
How to improve your credit health?
If you are not credit healthy, which is the opposite side of not having a credit score, there are ways you can get back on track.
The suggested course of action would be to obtain your credit report, look for pain points in the form of negative accounts or errors and to contest them with your past lenders. Post this process
Try to rectify any mistakes on your report and pay off any due if you are able. As for missed payments, if you get a loan or credit card and paying their dues on time for some time, it should offset the damage done by the missed payments.
If you are in debt you need to do is analyze your salary and know why you are in such serious debt. Write down all your expenses each month and weed out things that you don’t need. Plan a budget for the essential items and use the rest of your salary to pay off your debt as soon as possible. Pay off your largest debts first as the longer you keep it the bigger it is going to get. This way you can try and manage your debts and get out of it faster.
After all this planning and execution, you need to continuously monitor your finances to see if there are any discrepancies or if there is any situation where you need more money in hand. Adjust your strategy accordingly making sure you stay on your repayment path and at the same time able to manage your monthly expenses.
We hope we have impressed upon you the concept of credit health, your credit health and at face value your credit score should be maintained at a good level (generally accepted at 750) and you will be eligible for the best offers in credit in the future.
Credit Healthy toh Credit Wealthy