Looking for Credit Score advice? Here are 7 amazingly effective Credit Score lessons to be grateful for this Thanksgiving.
A good Credit Score is a direct result of not one but a bunch of smart financial practices. Here are 7 amazingly effective lessons that can ensure the speedy growth of your Credit Score, as long as you follow them without fail. Not paying heed to even one of these lessons can brutally stem the Credit Score growth you seek.
Follow these seven guidelines and, we assure you, come next Thanksgiving season, you’ll be the master of a drool-worthy Credit Score.
Here are the seven ingredients for an impeccable Credit Score.
Additional Reading: Busting Myths Around Factors Affecting Your Credit Score
Always pay your bills on time
Clearing your bills as soon as possible is the best way to avoid late payments, debt build-up and damage to your Credit Score. When you make payments on time, it indicates to banks that you have a responsible attitude towards credit management.
This also means that your Credit Score will not get affected negatively. If Credit Card or loan EMI payments are not made on time, then it indicates a lack of proper financial planning and can bring down your Credit Score.
Always pay your bills in full
Every Credit Card holder has two options for bill payments. The first option is to make the entire payment in one go, while the other is to pay the minimum amount due as calculated by the bank.
Going in for the second option, especially in times of financial crisis, will get banks off your back for a while. The remaining unpaid amount, however, will get reported to the credit bureaus as an overdue amount.
So, make sure you always choose the first option and pay your dues in full in order to maintain your image as a person who can manage finances smartly.
Additional Reading: Ways In Which Your Credit Score Impacts Your Life
Earn more, spend less
Earning more and spending less does not mean that your salary has anything to do with your Credit Score. It just means that you shouldn’t spend more than you earn. When your spending exceeds your earnings, the need for credit arises, which in turn may lead to more spending and accumulation of debt. Creating an emergency fund is a good way to avoid taking on unnecessary credit.
If you have taken a loan or own Credit Cards, make sure you don’t skip any payments. If you miss or default on your payments, it will definitely blot your credit history and bring your score down. It will also create problems when the time comes to take a loan in the future.
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Don’t be credit hungry
Continuously applying for loans or Credit Cards can be deemed to be credit hungry behaviour. Every time you apply for a loan, the lender will check your credit report. Every check will bring down your Credit Score by a few points.
When you apply for credit every now and then your score will fall drastically. The best thing to do is to not apply for a loan until you absolutely need one.
However, you can check your Credit Score as often as you want. This is counted as a soft enquiry and has no impact whatsoever on your score.
Maintaining a balance with your borrowing means that you should have a healthy mix of secured (Home Loan, Car Loan) and unsecured loans (Credit Cards, Personal Loan). Instead of applying for the same type of credit, take out a Home Loan, then a Personal Loan and then maybe a Car Loan. The idea is to create a good mix.
Tip: Too much unsecured credit in your report will make future lenders cautious about granting you a loan.
Additional Reading: How Does Bankruptcy Affect Your Credit Score?
Don’t close Credit Cards
It may seem counterintuitive to not close old Credit Cards that offer little to no benefits, but the simple fact is that these oldies are a true reflection of your money management skills over longer tenures.
An absence of Credit Cards entirely is not a good thing either. This will leave you without a platform to build a good credit history. The impact of an absent credit history will hit you hard when you apply for a loan and your application gets rejected due to lack of sufficient history. The ideal thing to do is to hold on to a Credit Card or two and use them wisely.
The idea behind inculcating these habits is to ensure that you never have to worry about your Credit Score falling. At no point will you have to worry about getting rejected for a loan or Credit Card. Just like a car that fails to work if not maintained, Credit Scores too can fail to work if not maintained properly.
Bonus tips: All financially responsible individuals check their Credit Score regularly. Become financially responsible today and check your Experian Credit Score for free right now!