For financial health and stability, it is vital to build a strong credit history. One can take a number of steps which include paying bills on time, keeping credit card balances low, keeping track of credit score and opting for secured credit card.
Steps to take to maintain a good credit history:
Pay bills: Payment history is one of the key factors which affects your credit score. So, it is important to pay all your bills, including credit card bills, loans, and utilities, on time.
Keep credit card balances low: Maintaining low credit card balances relative to your credit limit can positively impact your credit score. Aim to keep your credit utilisation ratio below 30 percent.
Credit score: Start by checking your credit score regularly. This way, you can spot for inaccuracies and work to improve the score if it is low.
Use different types of credit: Having a mix of credit types, such as credit cards, instalment loans, and collateral, can demonstrate your ability to manage various types of credit responsibly.
ALSO READ: Five factors that greatly affect your credit score
Keep old accounts open: Closing old credit card accounts can shorten your credit history and reduce the average age of your accounts, thus lowering your credit score. So, you should keep older accounts open, even if you don’t use them often.
Secured credit card: If you have trouble qualifying for a traditional credit card, a secured credit card can be a good starting point. Secured cards require a cash deposit as collateral, making them easier to obtain for those with limited or poor credit history.
Be patient: Building a strong credit history takes time. Consistently following good credit habits over an extended period will ultimately result in a positive credit profile.
Frequently Asked Questions:
Why should you keep credit card balance low?
Maintaining low credit card balances relative to your credit limit is likely to impact your credit score positively.
Why should you keep checking your credit score?
This way, you can spot for inaccuracies and work to improve the score if it is low.
Does checking your credit report affect your credit score?
A short answer is, it does not. In fact, it is advisable to keep checking the score from time to time for accuracy.
How is a credit score different from CIBIL?
Credit score is a more generic term that refers to a numeric representation of an individual’s creditworthiness. CIBIL score specifically refers to the credit score provided by CIBIL.
What are the secured credit cards meant for?
In case you face trouble getting a traditional credit card, you can opt for a secured credit card as a good starting point.
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Published: 08 Mar 2024, 01:18 PM IST