Establish Good Credit Habits To Build A Positive Credit Profile

Learn how to boost your credit score with smart habits and explore the role of Bajaj Finserv Credit Pass in elevating your creditworthiness.

Embarking on the journey to financial success is a lot like setting off on an exciting road trip. As you steer your way through the twists and turns of managing your money, there’s a crucial factor that acts as your trusty navigation system: your credit score. Just like a GPS guides you to your destination, your credit score paves the way for your dreams – whether it’s owning a snazzy car, a cozy home, or simply enjoying peace of mind. In this guide, we’ll uncover the secrets to building a solid credit profile, helping you navigate toward that ultimate destination of financial freedom.

Understanding The Credit Score And Its Significance

Your credit score tells lenders how adept you are at money management. In India, credit scores and CIBIL Scores are used synonymously, as the latter is a credit score offered by the nation’s oldest and largest credit information company, TransUnion CIBIL. So, what is your CIBIL Score? It’s a three-digit number, between 300 and 900 that is calculated on the basis of 5 key factors, namely your payment history, credit utilization, credit history length, credit inquiries, and credit mix. Most lenders view a score of 750 or higher as ideal and are more likely to not only approve your application for a credit card or loan but also work with you in terms of offering you longer tenures and lower interest rates. 

While a good credit score is not something that can be acquired overnight, it can be developed over time, through patience and diligence. So, if you’re wondering how to increase your CIBIL Score, here are some credit habits you can put into practice.

Be Punctual With Payments

Creditors love those who are punctual with their monthly payments. It tells them that you are committed to fulfilling your financial obligations and plan effectively in order to do so. If you struggle with this, there are ways you can master it and make it a habit. You can set up reminders either digitally or on a calendar so you are aware of upcoming deadlines and can honor them in a timely fashion. Alternatively, you can automate your payments so that they are deducted on a monthly basis, without you having to remember to make them. The only thing you would need to ensure is that there is sufficient balance for the deductions to take place without a hitch.

Keep Your Credit Card Balances Low

Your credit bureau in India monitors your credit utilization ratio, which is a percentage that represents how much of your available credit you’re using. While it’s tempting to use your entire available limit, doing so could have terrible consequences for your credit score. Instead, make a habit of using no more than 30% of your credit limit. This means not maxing out your credit cards, and attempting to spread purchases out across multiple cards if you own them.

Patiently Cultivate Your Credit History

An established track record of responsible credit handling speaks volumes to lenders about your creditworthiness as a borrower. A long credit history signals that your money management skills have stood the test of time. Therefore, don’t close old credit accounts or let them fall into disrepair. Instead, keep them in good standing and use them occasionally. Not only do they contribute to your credit score positively by adding to your credit history, but they also contribute to your available credit limit, thereby helping you maintain a lower credit utilization ratio.

Develop A Diverse Credit Portfolio

Lenders like to see variety in terms of credit types as it shows them that you can juggle different financial responsibilities. Having a blend of different types of credit, like credit cards, and loans – both secured loans, such as a home or auto loan, and an unsecured or collateral-free loan, such as a personal loan – can impress lenders and boost your CIBIL Score.

Minimize Your Hard Enquiries 

Each time you apply for credit, lenders take a peek into your credit report. This is known as a hard inquiry, which temporarily brings your score down. When you apply for multiple credit products within a short span, it makes lenders nervous. They wonder if you’re suddenly biting off more than you can chew. So, embrace new credit, but only when you need it, and remember to space out your applications so your credit score has time to recover from the hard inquiry. 

Read More: The 3 Best Ways To Verify Your Cibil Score Without Risking Your Credit

Regularly Check Your Credit Report

Reviewing your credit report periodically is important to identify errors and discrepancies and report them immediately to the credit bureau concerned so that they can be rectified. Just like a regular check-up for your financial health, this can help you save yourself from sustaining any damage to your credit score as a result of mistaken or fraudulent entries. 

Bajaj Finserv Credit Pass: Helping You Put Good Credit Habits Into Practice

Now that you’re aware of the good credit habits you should engage in, let’s talk about a unique service that can help you put them into practice with effortless ease: the Bajaj Finserv Credit Pass. Powered by CIBIL, its dashboard provides you with a bird’s eye view of all your credit accounts in one place so you can monitor your credit health report in real time and track your credit factors, such as upcoming payment deadlines, your credit utilization, and your credit mix. With its free monthly online CIBIL Score check and interactive tools, you’ll be well on your way to building a solid credit profile.

It takes time, mindfulness, and the right tools to make these good financial habits stick. So, start today and be proactive, and soon you’ll enjoy the fruits of your financial success.