Achieving a higher credit score? These seven minor actions could potentially yield results
Managing credit responsibly is crucial in today's financial landscape. Here are some key facts to help you navigate the world of loans, credit cards, and credit scores.
Firstly, it's essential to remember that Mint does not promote or encourage taking credit due to associated risks such as high interest rates and hidden charges. However, maintaining a healthy mix of secured (home or auto loans) and unsecured loans (including credit cards and personal loans) can positively impact a person's credit score.
Payment history is a key factor of a person's creditworthiness. Ensuring timely payment of credit card bills, loan EMIs, and other dues is, therefore, of utmost importance. Clearing any overdue amounts, including penalties or fees, is recommended to avoid radical harm to a person's credit score.
In India, the major credit bureaus where one can obtain a free credit report once a year are CIBIL (Credit Information Bureau India Limited), Equifax, Experian, and CRIF High Mark. Each of these agencies is authorized by the Reserve Bank of India to provide credit reports, which consumers can access annually for free as per RBI guidelines. It's advised to obtain a credit report from a credit bureau like CRIF High Mark or CIBIL at least once a year.
Keeping old credit accounts active can contribute to a longer credit history, which boosts a person's credit score. Old credit accounts should not be closed, as maintaining them can be beneficial. However, it's important to note that reducing the credit utilisation ratio is also crucial. For example, if a credit card limit is ₹1,00,000, one should try to keep the usage below ₹30,000.
Refraining from sending multiple loan applications can prevent temporary lowering of a person's credit score due to hard inquiries. Accepting a credit limit increase does not necessarily help or hurt a person's credit score, but the behavior associated with the increased limit might.
Lastly, it's important to approach credit matters with caution. It's advised to discuss these matters with certified experts before making any decisions. Mint has a tie-up with fintechs for providing credit, but this does not influence their editorial content.
The credit score is a key indicator of a person's creditworthiness. By following these tips, you can maintain a healthy credit score and ensure financial stability. This article intends to educate and spread awareness about credit needs like loans, credit cards, and credit score.
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