Easy Steps on How to Maintain a Good Credit Score

Personal Finance

Your credit history shows how responsibly you have managed the borrowed money so far and if you have repaid your credit bills on time. The CIBIL authorities summarize your credit history in a three-digit number, which is known as a credit score. Your credit score shows your lenders how financially reliable you are. So, maintaining a high enough credit score is a necessity if you want to secure a low-interest loan in the future. Let’s see some easy methods you must follow to maintain a good credit score.

Avoid Late Payments

Never missing a credit repayment is the best way to maintain a good credit score. When you miss paying one or more loan EMIs or forget to pay your credit card bills, it impacts your credit report negatively. And if you miss too many credit repayments, CIBIL authorities will mark you as financially unreliable, dropping your CIBIL score. 

To avoid late payments, you can use a banking or credit automation app that will automatically repay your EMIs and credit card bills from your main bank account. You can even set a calendar reminder so you never forget your credit repayment dates.

Maintain a Good Credit Utilization Ratio

The general rule of thumb is to always maintain your credit utilization ratio below 30% to avoid a drop in your credit score. It means that you should never spend more than 30% of the total credit limit on your credit card. Once your credit utilization ratio reaches the 30% mark, you should pay some of your credit card bills. It will not only help you maintain a good CIBIL score but will actually increase it.

Review Your CIBIL Report Regularly

Your CIBIL report directly influences your credit score. Therefore, if the CIBIL authorities make any mistake in reporting your credit activities, it can drastically lower your CIBIL score, even if it’s not your fault. That’s why keeping an eye on your CIBIL report is important.

If you see any inconsistencies that might be affecting your CIBIL score negatively, you must report them to the CIBIL authorities immediately. The authority will investigate your case and adjust your credit score accordingly.

Use Credit Mix

Too many unsecured personal, business, or education loans can be one of the biggest reasons for the reduction of your credit score, even if you’re repaying the EMIs on time. As these loans don’t involve any collateral, availing of too many of them can be seen as a big financial risk or an irresponsible financial decision. 

To maintain a good CIBIL score, you mix your credit lines with secured loans like home or property loans, which will balance the weight of the unsecured loans. After all, as long as you meet your repayment obligations, a healthy mix of credit is considered beneficial.

Never Exhaust the Credit Card Limit

You should always avoid exhausting your credit card limit, as doing so too often can negatively influence your credit score. If you keep doing this for a long time, your credit score can experience a significant dip. After all, it means you’re exceeding the 30% credit utilization ratio too often.

If there is no way to reduce the cost, you should request that your bank increase your credit limit. As long as you have a good credit and bill repayment history, the bank should accept your request and increase your card’s credit limit. This way, you can avoid exhausting your credit limit and maintain a good credit score.

Don’t Cancel Your Old Credit Cards

Do you want to cancel your current credit card and have a fresh start? Don’t do it. Canceling an old credit card is never a good decision, as it nullifies all the previous credit card records with the bank. It will negatively impact your overall credit score. You can avoid all this trouble by just not canceling your old credit card. Keep the credit card and renew it. If you want, you can even get a new credit card and use it along with your old one. It will help you maintain a good credit score.

Check Your Co-signed Loans

Did you ever cosign a loan agreement with another partner? If you did, you should keep checking your cosigned loan’s repayment status. Sometimes, the borrowers might be unable to repay their loan due to a sudden financial emergency or simply forget to repay the EMIs on time. As a co-borrower, these missed payments by other borrowers also reflect in your credit history, dropping your credit score. So, next time, keep an eye on your co-signed loans and take proper measures to maintain a good credit score.

Try Availing of at least One Credit Product:

If you have never bought any products on EMIs, never taken personal or business loans, or don’t even use a credit card, you will sadly have no credit history or credit score. And without a credit history, you will have difficulty securing a loan for a large amount of money. Even if you secure the loan, you will have to pay a higher interest rate as banks are taking a big risk by lending money to you, an individual with no credit score or financial history.

So, try getting at least one credit product, like a secured credit card or a secured loan, to start building your credit history. This way, you can finally receive a credit score after a few months. However, you should repay your credits or EMIs on time to raise your credit score to 750 or more, which is considered a brilliant credit score.

Final Thoughts

Maintaining a credit score of 750 or above is very important if you want to secure loans with low interest rates. Pay your credit card bills on time and maintain a good mix of credit lines. Keep your credit utilization rate below 30% and review your credit report regularly. If you have no credit history, you can apply for a personal loan from Piramal Finance to start building your credit history.