Anyone who wants to achieve financial stability must maintain a good credit score. In addition to making, it simpler for you to be approved for loans and credit cards, a high credit score also enables you to get better loan terms and interest rates.
But maintaining a high credit score is not always simple. To avoid traps that can lower your score, you need to be very disciplined and plan carefully. We’ll give you some advice in this article on how to keep a high credit score and make sure you’re headed in the right direction financially.
Making on-time payments is one easy way to keep your credit score high. To prevent late payments that could harm your score, set up reminders or automatic payments. You can also maintain a healthy credit score by keeping your credit utilisation low and routinely checking your credit report for mistakes.
What is a credit score?
A three-digit number with a range of 300 to 900 is used to represent a credit score. It serves as a gauge of someone’s creditworthiness. Before approving your credit application, lenders look at your credit score. In every loan or credit application, a high credit score is unquestionably advantageous. A good credit score is one that is 750 points or higher.
Knowing your credit score is essential when applying for loans or credit. A high credit score demonstrates financial responsibility and increases the likelihood of loan approval.
What is considered a good credit score range?
An excellent credit score is one with a score between 750 and 900. Credit scores in this range are preferred by banks, NBFCs, and other online lenders. The majority of credit products will be available to you if your credit score falls within this range. You can learn more about the CIBIL score range and its significance by looking at the following table.
To increase the likelihood of being approved for loans at favourable interest rates, it is advised to keep a strong credit score. If your credit score is under 750, you can work to raise it by making on-time payments on all of your debts and bills.
Also Read : What is Credit Score and how is it Calculated?
What are the benefits of a good credit score?
A good credit score can provide numerous benefits, including:
Lower interest rates: With a good credit score, you may be able to qualify for lower interest rates on loans and credit cards. This can save you a significant amount of money over time.
Easier approval for credit: Lenders and credit card companies are more likely to approve your applications if you have a good credit score. This means you will have more options when it comes to obtaining credit.
Higher credit limits: A good credit score can also result in higher credit limits on your credit cards. This can give you more flexibility in your spending and can help improve your credit utilisation ratio.
Better insurance rates: Some insurance companies use credit scores to determine premiums for certain types of insurance, such as auto insurance. A good credit score can lead to lower insurance rates.
Rental opportunities: landlords and property managers often check credit scores when considering rental applications. A good credit score can make it easier to secure rental properties and negotiate better lease terms.
Employment opportunities: Some employers check credit scores as part of the hiring process. A good credit score can give you an advantage over other candidates, especially for jobs that require financial responsibility.
How Can You Maintain a Good Credit Score?
1. Payment on Time
On-time payments reflect a responsible and healthy approach to credit, which aids in maintaining a high credit score. In fact, doing the opposite may indicate a careless attitude and poor financial planning, which can harm credit scores.
2. Apply for Only One Loan at a Time
Each time a person applies for a loan, the banks check their CIBIL score, which decreases with each triggered check. As a result, the overall credit score is effectively lowered. The credit score declines as a person applies for more loans.
3. Updated Credit Card Payments
A credit card can be kept active by making the minimum payment required by the bank, or it can be paid in full each month. However, CIBIL views the outstanding balance as past due, which reflects bad personal money management. Every time a check is initiated, this appears in the person’s history. To maintain a strong credit score, it is always preferable to pay the credit card bill in full.
4. Don’t close credit cards
To put it another way, if all credit cards are closed, there is no way to establish a credit history to rely on later when a loan is needed. To increase your credit score, it’s best to keep at least one credit card open and make timely payments on it.
5. Refrain from Payment Defaults
Make sure that all payments are made on time if there is a loan that has already been taken out on a credit card. Any omissions or defaults that are noted in the credit history can have a negative impact on the credit score and increase the likelihood that a loan application will be denied.
6. Manage Expenses Within the Earnings
When spending exceeds income, credit is created, which can fuel further spending and eventually result in debt collection. It is wise to keep your spending within a range that your income can support, as this raises your credit score overall.
7. Balance the Loan Types
It is a healthy habit to keep a mix of loans. The idea is to balance secured and unsecured loans. If the loans are heavier on the unsecured credit side—personal loans or credit card loans—it acts as a red flag and makes lenders cautious about granting further loans.
FAQ on Credit score
Q: What is a credit score?
Ans: A credit score is a three-digit number that represents an individual’s creditworthiness. It is based on information in a person’s credit report, such as their payment history, credit utilisation, length of credit history, and types of credit.
Q: What is a good credit score?
Ans: Credit scores typically range from 300 to 850, with higher scores indicating better creditworthiness. Generally, a good credit score is 670 or above.
Q: How is a credit score calculated?
Ans: Credit scores are calculated using complex algorithms that consider various factors, including payment history, credit utilisation, length of credit history, types of credit, and recent credit inquiries.
Q: How often should I check my credit score?
Ans: It is recommended that you check your credit score at least once a year to ensure that the information in your credit report is accurate. You can obtain a free copy of your credit report from each of the three major credit bureaus once a year.
Q: What can negatively impact my credit score?
Ans: Late payments, high credit utilisation, too many credit inquiries, collections, or bankruptcy can negatively impact your credit score.
Q: How can I improve my credit score?
Ans: You can improve your credit score by paying bills on time, keeping credit utilisation low, avoiding opening too many new credit accounts, keeping old credit accounts open, and using credit responsibly.
Q: How long does it take to improve a credit score?
Ans: The amount of time it takes to improve a credit score depends on the individual’s credit history and the specific factors impacting their score. Generally, it can take several months to a year or more to see a significant improvement in a credit score.
