Credit score

5 Important Ways to Boost Your Credit Score for Stable Financial Health This Year

Credit health = Financial health. Here’s how to improve your credit score

Borrowing helps us meet our monetary needs and achieve our financial goals. The goals are many: finish school, own a house, buy land, do home repairs, or even buy a household appliance.

To get a loan, you must be eligible for the loan. You have to fulfill certain conditions set by the lender. Among the many parameters that your lender checks before offering you the loan, your latest credit score is essential.

Your credit score is a number between 300 and 900. It is a measure of your creditworthiness. In simple terms, the credit score describes your eligibility for a loan taking into account your ability to repay.

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A credit score above 750 is considered optimal and should qualify you for most loans. The closer you get to 900, the better your chances of being approved, subject to other parameters such as your income.

It is recommended to have a solid credit rating at all times. You never know when you might need a loan. You don’t want to be in a situation where you neglect your score and suddenly need a loan, only to have it denied because your score is poor.

Here are five points you can consider if you want to maintain a good credit score.

A) Timely EMI and credit card payments: In the way credit scores are calculated, on-time payments have the biggest positive impact. Your score increases as you pay on time. It decreases if you are late. Late payments, whether it’s your credit card payments or your EMIs, have a negative impact on your credit history, and lenders don’t like that.
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B) Do not exhaust your credit limit: All credit cards have a set spending limit. The limit is set by the bank, taking into account your income and credit score. The higher your income and credit score, the higher your spending limit can be. But frequently hitting your spending limit will lower your credit score. It is advisable not to exhaust your spending limit and to stay below 30%. You can go higher in an emergency, but going higher on a regular basis is bad for your credit health. This is because you will be seen as credit hungry. New lenders will see this as a red flag.

C) Avoid many competing debts: Too many outstanding loans and card debts simultaneously will reduce your disposable income. Borrow wisely. Ideally, spend no more than 30-40% of your available money on NDEs, preferably less if your income is low. Too many unpaid loans against your name lower your credit score. Also, you risk defaulting if you lose your earnings, which could destroy your score.

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D) Mixed loans are good: Your credit score is slightly affected by the types of ready — secure or non-secure — that you took. A combination of secured loans (home loan, car loan) and unsecured loans (personal loan, credit cards or credit card loans) improves your credit score. However, your creditworthiness will be lower if your credit history is geared more towards unsecured loans.

E) Avoid partial payments on credit cards: Credit cards allow customers to make minimum payments, usually 5% of your balance. This often tricks borrowers into thinking that the minimum payment is sufficient. However, the balance continues to earn interest at 3-4% per month, which is a lot. Also, as your card balance increases, your credit usage increases and therefore your credit score decreases. Minimum payments incur high interest; they also lower your score.

In summary, on-time payments and low credit utilization are your best friends for boosting your credit score. Finally, if you use credit, do a free monthly online credit score check. This will help you understand how your credit behavior shapes your score. If your score is falling, you may be able to take timely action to improve it.

(Disclaimer: The opinions expressed in this column are those of the author. The facts and opinions expressed herein do not reflect the views of www.timesnownews.com.)