Once you start your credit journey with a card or loan, a credit footprint is created. This footprint is very important in building your credit profile and your credit score. Your creditworthiness reflects your credit history over time. Therefore good credit habits lead to a positive credit profile and a high credit score. Your credit rating determines your future access to credit.
Lenders will check your credit score to understand your credit profile, behavior and payment habits before approving your loan or credit card application. This is why it is important to demonstrate and utilize good credit habits. Not sure where to start?
Here are some key credit habits to keep in mind when building and maintaining a positive credit profile:
Plan Your Financial Goals and Priorities – Think about your income to EMI ratio and try to keep it under 30%. And just because you have access to credit, you should only apply for a new loan when you really need it. This type of planning is essential to achieving your financial goals and maintaining a positive credit profile.
Budget and Savings – Since we live in a time where we have access to credit at any time, we need to be prepared for an unfavorable turnaround that can make it harder for us to get into financial trouble. The rule of thumb is to have a salary savings of about three months, kept away as an emergency fund, so you can get over any financial trouble easily. Click here for house repair loan.
Track Your Spending – Tracking how much you earn and how much you spend weekly or monthly (also known as your income/expense ratio) can help you track your expenses, figure out what can or cannot be avoided, and manage expenses accordingly.
Use your access to credit wisely – While credit can help you meet your life goals or help you in an emergency, be careful how often you apply for a credit card or loan – even if it’s just a matter of verifying your eligibility for a loan. Even if you have a credit card with an extended credit limit, maintaining a low credit utilization rate and spending within your card limit is a good credit habit.
Stay Credit Conscious– Do you keep financial statements and check your bank and investment statements frequently? Likewise, responsible borrowers stay connected to their credit profile and regularly check credit score and reports. This helps them follow their credit profile, card fees, loan amount and credit history while also monitoring the credit information shared with credit rating agencies by their lenders and banks. It also helps them better understand their eligibility for loans so that they can access loans when they need them most.
You can make a credit score check free online by visiting a lender’s website and providing the required details like PAN no. and name.
Read More : How does Experian calculate your credit score?