Here are five habits you can follow to boost and preserve your creditworthiness:
Timely payments build trustworthiness
On-time payment of EMIs, credit card bills, and personal loan dues on time is the most critical factor in credit scoring. Even a single missed or delayed payment can negatively influence the score, signalling risk to lending institutions. Setting up automatic deduction or reminders ensures repayment of bills is never late.
Prudent credit utilisation is key
Keeping credit utilisation below 30-40% of the total available credit limit is another crucial habit. For example, spending less than ₹30,000 on a credit card with a ₹1 lakh limit avoids appearing over-reliant on credit, which can lower the credit score and demonstrate over-reliance on debt to meet day-to-day expenses. That is why the over-extension of the credit utilisation ratio is a big negative.
Limit loan applications to avoid multiple hard inquiries
Financially savvy individuals sensibly space out personal loan or credit card applications. They never apply for several different credit applications within a short period of time, as it demonstrates credit hunger. Frequent loan inquiries can be seen as a sign of credit dependence, and they can even temporarily reduce credit scores.
Maintain a healthy mix and age of credit
A well-planned and balanced portfolio of secured loans (home loans, auto loans) and unsecured credit (personal loans, credit cards) can positively impact the score.
Keeping older accounts active also demonstrates long-term financial stability. Lenders see several ongoing loans with decades of history and consistent repayment on time as a big positive.
Regularly check credit reports for errors
Going through credit reports on an annual basis helps detect and correct inaccuracies and mistakes. Mistakes such as wrongly worded reported defaults, which otherwise bring down the score. Disputing mistakes promptly is a sign of smart financial management and economic prudence on the part of an individual who is willing to ensure that their credit score continues to remain high.
A strong credit score isn’t about chasing numbers; it’s about building financial freedom. The habits are simple: pay on time, borrow wisely, and stay alert. Over time, these small, consistent steps compound into lower interest rates, higher credit limits, and stress-free approvals.
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