Good Credit Score

All you need to know about building a good credit score and credit history

· 5 min read
Good Credit Score

Credit score is a statistic ranging from 300 to 900 which represents the discipline of an individual in terms of finance. Higher the score(good credit score) , numerous lenders will be up for it to give you a loan at a lower interest rate or a credit because it shows your potential to pay out debts on time. Although different lenders have different definitions for good credit score ranges for lending money. Try to refer to your credit report in order to know where you lagged and what works for you. Today here in this article we will see ways to develop a good credit score, what is a good credit score, importance of good credit score and also advantages of it.

How to Check Credit Reports for Free?
Credit Reports are made by credit bureaus for all the individuals which includes the information related to default/late payments made by that individual and all the credit history of an individual. Since 2017, the Reserve Bank of India (RBI) made it mandatory for the credit bureaus to provide 1 free credit report for the customers in one calendar year. There are currently 4 credit bureaus in our country: TransUnion CIBIL, Experian, Equifax & CRIF Highmark. So, one can avail a total of 4 credit reports in 1 calendar year for free.

How to find a Credit Report?
There is a term called a control number or inquiry control number which is a 9-digit unique number assigned to each report, which helps to fetch the credit report of an individual.

Advantages & Importance of Good Credit Score

- Low interest rates for loans
- High Credit Limit
- Low default charges
- High Negotiating Power to ask for low interest rates of loans or credit defaults
- High Benefits of rewards (Credit Cards)
- To avail loan for longer duration
- Fast approval for credit cards/loan

Good credit score is in the range from 700-900. Don’t worry if you have a low credit score, we are here to help you out. Just go through the below points to know how to get a good credit score. Following that consistently will lead you to the benefits of traditional credit cards & loans.

How to develop a good credit score?

There are few ways which can help you develop a good credit score and good credit history:

1.Timely Repayments:
It is important to start paying your full credit card dues and Loan EMI’s on time. Start putting reminders for repayment. If you use low credit score credit cards for a longer period then you can’t avail benefits of traditional credit cards and also destroy your wealth by paying high annual fees. If you treat your debts better then they will also take care of you by giving you extra returns. (Increased credit score and benefits of using credit card)

2. Review your credit reports:
Go through Credit Information Reports, as mentioned above it is free up to a certain limit. It helps the person to figure out which things work for him/her and also where he/she is lagging.

3. Customizing Credit Limit:
Card provider might increase your credit limit with time but one should customize his/her limits by contacting a credit card provider. Even if a person uses a whole credit limit which is provided by the bank will lead to a decrease in the credit score. The customizing limit will help to manage your debts and it is one of the key features to maintain a good credit score.

4. Credit Utilization Ratio (CUR):
The Credit Utilization Ratio mentions the maximum amount of money one should spend with respect to their credit limit. If you don’t customize the credit limit then at maximum one should use 30% of the credit limit. If your monthly credit limit is Rs 10,000 then you should spend a maximum of Rs 3,000 per month. Maxing out your limit will be called credit hungry behaviour which can lead to a decrease in credit score. Lower the usage of credit better will be your credit score because it will be easy to pay the borrowed money.

5. Taking Loans for longer duration:
Good credit score for a loan is required in order to avail loans at low interest rates.Taking loans for longer duration will lead to small affordable EMI’s and paying off loans consistently for a longer duration without any defaults will help the person to improve credit scores. Consistency is the key to improved credit scores. Credit scores have a component of Payment history and Age of credit account, so the person can perform better on that.

6. Credit Mix:
Try to diversify your credit usage like borrowing money by using a credit card, opting for a student loan, car loan, and home loan, and also timely paying it. This diversified borrowing will show the lender how the person can manage the different types of debts at the same time and will lead him/her to a good credit score.

7. Avoid Multiple Credit Requests:
Try to avoid multiple credit requests in a very short span of time because banks or institutions ask for the credit report of the applicant to the credit bureaus. Lender initiated credit report inquiries are termed as hard inquiries , which reduces the applicant’s credit score by a few points.

Credit cards for low CIBIL should be used correctly because it is going to help you to get rid of low credit score credit cards by increasing your credit score and fetch you a traditional credit card. Credit cards help you to use the money for a few days without any interest and also one can earn rewards for using credit cards. A person named Konstantin Anikeev in the US earned 2.17 crores just by paying off credit card bills. He used to buy gift cards using a credit card and encash them to pay off bills.
So, he made a profit from the rewards, which he was earning from the credit card company after subtracting charges to encash gift cards. So, use your credits wisely and payout debts on time. If compounding can do wonders in the investments similarly credits can also help you to do wonders. Maintain a good credit score and also financial hygiene.

Good Credit Score - Frequently Asked Questions

1. Does check bouncing affect the credit score of an individual?
No, if you can repay your debt or loan installment on time, despite bounced cheque, your credit score doesn’t get affected because your ability to repay is not at all affected.

2. Does low balance in savings accounts affect my credit score?
No, the money in the savings account is your own earned money. Credit bureaus keep track of the repayments of the credit or repaying installments for loans that you have borrowed from some institution or a bank.

3. What does it mean when my credit score is NA or NH?
NA stands for Not Applicable and NH stands for No History. If you have such a score don’t worry, it means
- Not having credit history in the past 2 years
- No credit History; you are new to a credit system

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