Today, we will talk about how you can keep a good credit score. Before that, let’s do a recap of what is a credit score and what are its benefits. A credit score is a bank’s way of knowing that it can trust you with its money. The higher your credit score, the more loan and credit you can take from bank. The benefits of a good credit score stay for your lifetime. After all, you never know you may need to borrow some money from the bank. A good credit score means you can get pre-approved loans and that too at a good rate of interest. So, let’s now get into our topic for today – how to keep a high credit score.
How To Get A High Credit Score
Pay Bills On Time
The simplest tip to get a high credit score is to pay your bills on time. Not paying bills on time makes you a defaulter and a bank does not like that. This is a long process and the simplest way to get a good credit score. However, for this purpose, get yourself a credit card too. Spend wisely so that your bills do not become overbearing. When you think your use for a credit card is over, discard it. At least your credit score will be in the green by then. Early payments can affect your credit score too. You only pay your bills early if you have money. However, to a bank, it is a sign of unstable financial condition. Hence, refrain from early payments as well.
Keep Few Credit Cards
There are a lot of people having multiple credit cards. There is no problem in keeping more than one credit card. However, do monitor your use of the same. If you don’t have use of two or more credit cards, don’t sign up for more. This way, a bank will get to know how much credit you could get from the market. Now, if you have more credit availability than you can use, you may be looked upon as a big spender. You can look at this in two ways – a big spender who can pay his/her bills or who cannot pay his/her bills. Usually, the bank looks at you from the second direction. Having adequate credit that you can use is great for you and your credit score. At least you will spend and pay the amount of credit you take for your needs.
Keep Borrowing To A Minimum
The more credit or loans you take, the more you will spend. This presents you to a bank in a negative light. Now, for instance, lower credit limit means you are close to exhausting your credit limit. This means that may be you will be able to pay your bill or you will not. Even if you are able to pay it, your behaviour is what brings your credit score down. The same goes for a loan. A person who is always on the lookout to borrow more is not a good sign. It just shows one’s expenses are not in his/her control. So, keep borrowings and exhausting your credit card limit to a bare minimum.
Refrain From Mixed Credit
This bit is important. Do you know that credit cards count as unsecured means of credit? After all, what are you securing to pay that advance with? Similar is the case with personal loans, which are counted as unsecured loans. Car loans and home loans are counted as secured loans. The message here is simple – stay away from unsecured loans and prefer secured loans. Why? If you have an unsecured loan, the bank may not be able to recover its money from you. Hence, it will mark you down, affecting your credit score.
Having a good credit score can positively affect your financial situation. You will be able to secure loans easily and at good interest rates. Not just that, the banks will offer you their premium services on the basis of a good score. So, keep a note of the points above and maintain a high credit score.