The most effective way to manage a good credit history is to reduce one’s credit utilisation ratio. This would mean balancing one’s spending against the credit limit.
The primary objective of a credit score is to ascertain the creditworthiness of the borrower. The main criteria used to calculate a credit score includes payment history, credit utilization, length of credit history, credit mix, and new credit.
Gaurav Jalan, CEO and Founder – mPokket says, “A prerequisite to accessing credit is having a good credit history. To build a good credit score from scratch, one can start with opening a savings account first.” A bank is likely to give you a credit card against your savings account based on your pre-existing relationship. Many banks willingly offer a credit card against your salary account. Another way would be to get a credit card against a fixed deposit.
The most effective way to manage a good credit history is to reduce one’s credit utilisation ratio. This would mean balancing one’s spending against the credit limit.
He further adds, “Another important factor to keep in mind is for the borrower to pay his/her outstanding bills on time. Paying only the minimum amount often leads to accumulated interest on the unpaid bill.” A history of delayed payments is sure to negatively impact your credit history.
In case managing multiple credit cards is difficult, experts say opting for consolidating your debt via a credit balance transfer could be an ideal option. Jalan explains, “Also, an often-ignored factor among youngsters is the frequency of hard inquiries. The high frequency of hard inquiries affects one’s credit score. Therefore, avoid applying for multiple credit cards unnecessarily.”
Note that, the biggest advantage of having a good credit score is gaining access to higher credit and lower interest rates. Not just that, it is also easier to get quicker loan sanctions and negotiate for better terms.
Jalan explains, “Countries like the United States or the United Kingdom check one’s income tax records during a visa application. Having a high credit score adds weight to an individual’s immigration application.”
Along with that, a good credit score can also be leveraged to get a better premium while purchasing insurance. Depending on the place, even landlords run a credit score check before renting out a commercial/ residential property.
“Even if one does not have the intention of borrowing any loans or applying for more credit in the near future, it is always advisable to maintain a healthy credit score. A better credit history in front of the lender always works in your favour,” points out Jalan.
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