Healthy Credit Score :
7 Best Practical Tips
by Ms. Aparna Ramachandra,
A habit is described as a settled or regular
tendency or practice, especially one that is hard to give up. As we all know
“bad” habits are easy to pick up and live with. It is the “good” habits that
are difficult to learn, develop and cultivate.
Financial health..!
A good habit is a behaviour that is beneficial to
one’s physical or mental health, often linked to a high level of discipline and
self-control.
The same rule applies to financial health as
well. An example of this is credit score, which is a numerical expression based
on the analysis of a person’s credit history to represent the creditworthiness
of that person.
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| Ms. Aparna Ramachandra, www.rectifycredit.com. |
It is very important, even essential, to have a
good credit history, as it has an effect on a person’s ability to get credit
later.
There are a 7 things that can be done to develop
a healthy credit score.
1. Pay your bills on time..!
This is
the golden rule of building a good credit history. Paying back on time proves
your credibility as a good borrower, apart from saving you the expense of late
fees & other unnecessary charges.
Bills like credit card payments and instalments
for home, auto or / personal loans need to be paid on time.
If you are someone who doesn’t remember the due
dates, it’s a good idea to use the facility of electronic clearance service
(ECS).
This will ensure timely payments and bring in
financial discipline as you will be forced to keep the required amount aside in
the bank account. You may have multiple credit cards, and may get confused with
the various due dates, which results in one or the other payment deadline being
missed.
Apart from setting up ECS for such payments, you
can also ask the banks to adjust the due dates to one that is more suitable.
What you have to do is approach the bank, and it will suggest a few dates. You
have to choose the most suitable one from among the dates offered; you can not
select just any date.
2. Manage your debt..!
Be aware of the amount of your debt, and set a
repayment timeline and schedule. Seek professional assistance if need be to
plan your repayments smartly, especially credit card dues.
A credit card is convenient to use, but repaying
the dues before or by the 45-day wait period is equally important.
It’s best to pay the full amount due. But, if for
some reason, that is not possible, ensure that you meet at least the minimum
payment requirement; it’s better than not paying at all.
Doing so shows other lenders that you are a
responsible borrower. Rather than having the total balance (the full amount
that you owe the lender) and paying up to 3% compounded monthly interest on it,
it’s advisable to reduce your balance and effectively pay lesser interest.
Of course, the best thing to do is to save before
buying something expensive.
3. Always have a credit card in use..!
This is one of the best kept secrets in the world
of credit repair and credit building. A live credit card does wonders to your
credit score, as, being an unsecured product, the way you handle it month on
month gives an indication of your credit behaviour.
So, go ahead & apply for a credit card if you
do not have one yet. But with the perks comes responsibilities. Remember to use
it prudently and repay the entire dues on time.
Consistently high credit utilization, late
payments, or even too many requests for credit cards are all negatives.
Judicious use of credit and on-time payments indicate responsible behaviour.
4. Only apply for credit when necessary
It’s important to have a healthy mix of lines of
credit, including credit cards, auto loans, home loans & even personal
loans.
A healthy and well-diversified credit portfolio
goes a long way in proving your credit worthiness. It shows that lenders are
willing to trust you with their loans. And the more available credit you have,
the lower your credit utilization ratio will be. But there is a fine line that
divides optimum usage from over-usage.
Some people tend to say yes to every new card or
loan offer. Some of these applications are approved, some are not.
What they don’t realize is that the number of
applications and repeated rejections from multiple lenders hurt the chances of
their getting loans when they need it, say, to buy a house. Repeat rejections
from multiple lenders pull down your scores, and dent your credibility. Avoid
5. Choose credit cards carefully..!
People with excellent credit usually get the best
credit card offers. But, be smart about the cards you choose.
For example, retailers often offer discounts on
purchases when you sign up for their credit cards. But these cards often have
low credit limits, which can hurt your credit utilization ratio if you carry a
balance on those cards.
Cards with high annual fees also should be
avoided. Always insist on a no-fee card. A smart thing to do is to look for a
card that waives that fee for the first year and then re-evaluate the card in
the second year to see if the benefits outweigh the fee.
You could also look for cards that offer a 0%
interest rate for the first year. But this is only if are able to fully
understand the often complicated fine details of how this loan will work. If
not, please stay away and just opt for a no-fee card.
6. Always close your loans..!
Sometimes, closure is more important than new
beginnings. It is important to repay on time.
And when it’s time to close the loan, ask the
lender to return all the hypothecated documents (if any) and seal the closure
document in black and white.
For instance, you may want to sell your old car.
You have paid all the EMIs and think the loan is “closed”, when, in fact, you
have not collected the documents from the lender, which the buyer will need to
verify that no loan is pending on the car.
Collect the closure letters (which will differ
across loans) and verify if this has been updated with the credit bureaus.
Old loans
that are not closed are like teenage crushes you want to hide from your spouse;
they pop out at just the wrong time.
7. Let your loan accounts age
The longer you have had credit, the better it is
for credit score. Leave the oldest loan accounts (such as a credit card) open
since this helps increase credit age and build a good record.
It behaves such as a confidence booster for a new
lender, showing how responsible/irresponsible you have been in the past, and
whether you can be trusted with the new line of credit.
For young borrowers, it is especially important
to use available credit lines and repay on time.
About the author
Ms. Aparna Ramachandra is the founder director of
www.rectifycredit.com
CONTACT
Address: 403,A-Wing,Techno City,
Plot No.X-4/1 &4/2, TTC Industrial Area, Mahape,
Navi Mumbai -4 00 710, Maharashtra,India.
Contact No : 022 -27781302
Mobile No :+91-8082554356, +91-8082554357, +91-8082554358, +91-8082554359
Email : info@rectifycredit.com
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