The Buyt desk
A good credit score is a statement of good financial behaviour. This score is very important if you want to take out a loan in future. The 3 digit score ranges from 300 to 900. A Credit Score closer to 900 is considered good and a score closer to 300 can make it difficult for you to get any loans. Banks and institutions even decide the interest at which you get your loan based on your credit score. Two individuals can get the same amount of loan on different interest rates depending upon their credit score. A credit score above 750 is considered excellent whereas a score less than 630 is considered bad.
A bad credit score means that the financial institutions and banks will not be comfortable in offering loans. If you get a loan you will be paying more interest on the loan.
Discipline Your Financial Habits
If you take wise steps to manage your credits you could take care of your credit score. Here are a few things that you must do-
1) Credit Card
If you have a credit card ensure that you don’t delay credit card bill payments. Don’t get comfortable with the minimum due payment option. Every time you delay the payment by using the minimum due option your credit score gets impacted. Usually, a credit card gives you a buffer of 30-45 days. You must ensure that you make the payment in the given time. Do not exceed your capacity while spending. Overspending beyond your capacity will push you to extend the payment deadline. The payment for the credit card is 30% of the credit score.
2) Credit Utilization
Credit utilization refers to the extent to which you utilize your available credit. In the case of credit cards, it is seen that what is the limit of the card and do you use it fully? In the case of a loan, it is seen how much loan balance is left of your loan. Ideally, you should not fully exhaust the credit limit and the usage should be 30-40%. Credit Utilization makes for 30% of your credit score.
3) Credit Hungry
A consumer is called ‘credit hungry’ when he/she makes frequent loan enquiries. It has the potential of ruining your credit score. When you make a serious enquiry about the loan the bank will check your credit credential. But if you have gone to many other banks too and all of them check your score this could be bad news for your credit score. This shows that you are struggling to get a loan and are running from one bank to another. This behaviour will impact your credit score by 20%.
4) Credit Mix
The more the merrier but this doesn’t stand true as far as loans are concerned. Too many loans can spoil your credit score by 10%. You must have a balance between secured and unsecured loans. If there are too many unsecured loans in your portfolio and you are also paying a huge car loan or a home loan you must be careful. This could disbalance your credit score.
5) Loan Guarantor
Never become a loan guarantor based on friendship or acquaintance. If you do want to become a guarantor then you must definitely check the credential and payment capacity of the person. A loan default by another person can cost you dearly if you are the guarantor. This type of default can affect your credit score by up to 10%.
So keep these five things in mind and move towards a good credit score.
