Saturday, October 11, 2025

5 proven habits to improve your credit score and loan eligibility

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A single missed credit card payment can follow you for years, making loans more expensive or even leading to rejections. On the other hand, a healthy credit score unlocks lower EMIs, bigger loan eligibility, and faster approvals. As banks and fintech lenders increasingly rely on credit scores to decide who qualifies and at what rate, it pays to understand how to build and protect your number.

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.

For all personal finance updates, visit here.

Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.

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