As the importance of credit score is growing, it now not only serves to determine the credibility of the person but also helps in processing fee waiver or concession or helps in employment verification. Every financial organization or bank prefers credit score to evaluate your creditworthiness for approving any credit application. There are a few important points mentioned below which would help you to create a good credit score: helps in assisting to create a good score:
Disciplined and regular usage of credit cards
For a new to credit consumer, consistent and disciplined usage of credit cards is a great way to build a strong credit score. Unlike loans wherein interest cost is attached with principal repayment, credit cards do not involve such mandatory finance charges until you pay the bills timely and in full. It makes credit cards a more cost-efficient option to build a credit score. If you are new to credit, consider applying for a credit card from the bank with whom you already have an existing relationship.
To opt for the most suitable credit card according to your eligibility, spending habits and financial requirements, consider visiting online financial marketplaces to compare and choose the most optimal card for yourself conveniently.
Check your credit report periodically
It is required to review your credit score often to ensure its correctness. There may happen a chance of some fraudulent transactions and errors from the end of the credit bureau or the lender while maintaining records that may lead to hampering your credit score. However, if you find any such errors, you can raise the concern immediately and get that corrected, thus rectifying your credit score.
Limit your credit utilization ratio to 30-40%
The credit utilized out of the total limit is termed as a credit utilization ratio. It is generally considered to be 30-40% of the consumption is the ideal utilization of the credit limit. So if you have a card of credit limit worth Rs. 10,000/, your credit utilization should be around Rs. 3,000-4,000. Overuse of this credit limit will have a has a negative impact on your part. However, if you always require enough credit then either ask your lender to increase the limit or else prefer an additional card thus reducing your credit utilization ratio.
Pay your bills and EMIs timely and in full
Ensure a habit of making timely payments of your bills, or EMIs charged on credit card. Any delay in payments could affect your credit score. Consistent payments of these bills and EMIs helps you to get a good credit score and increases your chances of approving of your credit application. You can also opt for an automatic deduction against these bills from your account to ensure timely payment.
Avoid multiple and direct inquiries to lenders
Whenever you need a loan or credit card, and you apply directly, the lender fetches your credit report for your creditworthiness. But once you start searching for such loans multiple times, the credit bureau starts keeping a track and reduces your credit score depending on specific points.
Hence, whenever you require such loans or credit cards do not apply for it directly with multiple lenders frequently. Instead, you can visit the sites of these multiple lenders, understand their eligibility criteria, and then choose the appropriate lender as per your financial requirements. By doing this, you will not be sharing your credit reports with multiple vendors and thus it will create a negative impact on your credit score. Many vendors hence it will not have a much negative impact on your credit score.
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