A healthy credit score is important for your financial health. It can significantly impact your ability to get approved for loans, credit cards, and even affect interest rates. Maintaining a good credit score can open doors to better financial opportunities, and the process is not as complicated as it might seem.
This blog will guide you through simple yet effective steps to maintain a healthy credit score, improve it over time, and avoid common mistakes that could hurt your credit profile. We’ll also share smart credit score management strategies to help you build long-term financial confidence.
Before diving into the credit score tips, it’s important to understand the key credit score factors:
Now that we know what affects your score, let’s explore credit score management tips to help you maintain a healthy score.
Ensuring timely payments is one of the easiest ways to improve your credit score. Whether it’s your loan EMI, credit card bills, or payment of any credit product like Buy-now-pay-later, paying on time is crucial.
Keeping your credit utilisation below 30% is one of the best ways to maintain a healthy credit score. For example, if the total credit limit of all your credit cards is ₹2 lakhs, then your monthly credit card spending should not be above ₹60,000. Some months could be exceptions, but do not make a habit of spending heavily with credit cards. A study by Experian found that users with a utilisation rate below 30% were more likely to have higher credit scores.
When you apply for a loan or credit card, lenders (Banks and NBFCs) ask credit bureaus to share your credit report. This is considered a hard credit inquiry, which can temporarily lower your credit score. A hard inquiry can temporarily lower your credit score by 5-10 points, and the record of a hard inquiry stays in your credit report for 6 to 12 months.
Your credit score benefits from the length of your credit history. A longer credit history gives lenders more confidence in you. Closing old accounts may shorten your credit history and negatively impact your credit score.
Sometimes, wrong data shared by lenders or an administrative mistake by a credit bureau can put false or incorrect information in your credit report, which can negatively impact your credit score. Regularly checking your CIBIL report helps you spot such errors or signs of fraud early. If you find any errors, you can dispute them with the credit bureau to have them corrected.
In addition to the commonly known factors that affect your credit score, one often-overlooked aspect is the management of co-signed loans. If you’ve co-signed a loan for someone, such as a family member or friend, that loan will appear in your credit report and impact your score.
Maintaining a healthy credit score is not a one-time task but an ongoing process. By following the steps outlined above, you can maintain a healthy credit score, which will ultimately help you secure better loans and credit cards and improve your overall financial health.
With a free credit score check service available through DMI Finance, monitoring your credit report is easier than ever. Manage your credit score effectively and make informed decisions to take control of your financial future.
1. How can I improve my credit score quickly?
To improve your credit score quickly, focus on paying down existing debt, especially credit card balances, and pay bills on time.
2. What is the ideal credit score range for loan approval?
An ideal credit score for loan approval varies by lender, as most major banks typically offer loans to individuals with a credit score of 750 or higher. However, different lenders may have varying requirements. DMI Finance offers personal loans to individuals with a credit score of 700 and above.
3. How often should I check my credit score?
It is recommended to check your credit score at least once every three months.
4. What is a good credit utilisation ratio?
A good credit utilisation ratio is 30%. This shows lenders that you’re not relying too much on credit.
5. Can my credit score be affected by closing old accounts?
Yes, closing old credit accounts can shorten your credit history, which may negatively affect your score.
6. How long does it take to improve a low credit score?
Improving a low credit score can take anywhere from a few months to a year, depending on your credit actions and current credit status.
| Term | Definition |
|---|---|
| Buy Now Pay Later (BNPL) | A credit facility that lets you purchase items now and pay in instalments later. |
| Credit Profile | A summary of your credit behaviour, including your score, types of loans, and repayment record. |
| Credit Product | Any financial product that allows you to borrow money, such as a credit card or personal loan. |
| Credit Limit | The maximum amount you can borrow/ use using a credit card or credit account. |
| Default | Failure to repay a loan’s EMI or credit card bill on time. |
| Dispute (Credit Report) | A formal complaint you file with a credit bureau if you find incorrect information in your report. |
| Financial Health | A status of your overall financial condition, including income, savings, debt, etc. |
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