Before taking any loan, banks check your credit score. If it is weak then loan is not easily available. Factors like paying EMIs or bills, credit card limit usage and frequently applying for new loans affect the credit score. In such a situation, if due to some reason your credit score has decreased, then it can be strengthened by maintaining right habits. Here we are telling 5 such habits… 1. Pay every EMI and bill on time. The most important habit to improve credit score is to pay every month’s EMI and credit card bill on time. Late payments get recorded in your credit history. Therefore, do not forget the payment date, for this take the help of automatic payments or reminders. 2. Limited use of credit card limit. Getting a large credit card limit does not mean that the entire amount has to be spent. How much money you use out of your total available limit is called ‘credit utilization’. According to CIBIL, high credit utilization makes lenders feel that you are completely dependent on borrowed money, which can weaken your credit profile. 3. Apply for new credit only when needed. Avoid repeatedly applying for new credit cards or loans due to the lure of cashback or joining offers. Whenever you apply for a new loan or card, the lender checks your credit report, which is called a ‘hard enquiry’. Half an inquiry doesn’t make much difference, but applying multiple times in a short period of time can impact the score. 4. Close old credit accounts thoughtfully. Having an old credit card which has a good repayment record is beneficial for your credit score. A long history shows that you have managed credit responsibly over a long period of time. Closing an old card reduces your total available credit limit, which can increase the utilization ratio. However, only consider closing the card if it starts incurring unnecessary high fees. 5. Keep checking credit report regularly. You should keep checking your CIBIL report regularly. The report contains details of all your credit accounts, balances, payment history and inquiries from lenders. Any unknown account, wrong balance amount, duplicate entry or unauthorized inquiry can be detected in time and a dispute can be lodged. Score will improve with discipline, not shortcuts. No shortcuts work in building a strong credit profile. Habits like paying bills on time, balanced use of credit card limit, not applying for unnecessary loans, keeping old cards active and regularly checking CIBIL reports together improve the score. Knowledge Box: What is hard and soft inquiry?
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Adopt 5 habits for a strong credit score: Paying EMIs on time and using less cards will improve your profile, avoid frequent inquiries.
