Having a good credit score is essential for achieving financial stability and accessing credit facilities. Your Equifax Score, also known as your credit score, is a three-digit number that reflects your creditworthiness to lenders and financial institutions. In India, one of the primary credit bureaus that provides credit scores apart from Equifax is TransUnion CIBIL. In this article, we will explore effective tips and strategies to maintain a healthy credit score and pave the way to a brighter financial future, regardless of the credit scoring model.
Understand your credit report
The first step in maintaining a good credit score is to obtain and thoroughly review your credit report. The report contains a detailed history of your credit accounts, payment history, outstanding balances, and any negative remarks. Regularly check your credit report to identify any discrepancies or errors that could potentially harm your score. If you spot inaccuracies, promptly report them to the concerned credit bureau for rectification.
Pay your bills on time
Timely bill payments are crucial for maintaining a positive credit score. Late payments can significantly impact your credit score, so it's vital to pay your bills, such as credit card bills, loan EMIs, and utility bills, on or before the due date. Set reminders or use automated payment systems to ensure you never miss a payment.
Keep credit utilisation low
Credit utilisation refers to the percentage of your available credit that you are using at any given time. To maintain a good credit score, aim to keep your credit utilisation below 30%. High credit utilisation indicates a higher credit risk to lenders, so it's best to pay off outstanding balances regularly and avoid maxing out your credit cards.
Avoid frequent credit applications
Each time you apply for credit, a hard inquiry is made on your credit report. Multiple hard inquiries within a short period can negatively impact your credit score, as it may suggest a higher risk of credit default. Be selective about applying for credit and avoid making multiple applications simultaneously.
Diversify your credit mix
Having a diverse mix of credit accounts, such as credit cards, collateral-free loans, and secured loans, can positively influence your credit score. Responsible management of different types of credit demonstrates your ability to handle various financial responsibilities effectively.
Don't close old credit accounts
The length of your credit history plays a role in determining your credit score. Closing old and unused credit accounts may reduce the average age of your credit history, potentially affecting your score negatively. Instead of closing them, consider keeping old credit accounts open, as long-standing accounts with a good repayment history can boost your creditworthiness.
Monitor your joint accounts
If you have joint credit accounts, such as shared loans or credit cards, be aware that any late payments or defaults on these accounts will also impact your credit score. Keep a close eye on joint accounts and communicate with the co-owner to ensure timely payments.
Maintaining a good credit score is vital for a healthy financial life, regardless of whether you refer to an Equifax Score or a CIBIL Score. Follow the tips outlined in this article to ensure a positive credit score and enhance your borrowing capabilities. Remember to check your score regularly and take steps to rectify any discrepancies.
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