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- A good credit history is paramount when it comes to getting a loan or credit card approval from the lender
- Read here the things to avoid for a good credit history
Getting a loan or credit card is dependent on your payment history. If you default on a credit card bill or loan EMI payment, your credit history will be poor. It could disqualify you from the approval race. So, if you don’t want any such hassles, ensure your repayment track is good. You should avoid committing some mistakes that most do and end up with a poor credit history. Read this article further to know the mistakes you should stay away from.
Table of Contents
Avoid Making Late Payments
Making late payments does not look in your credit record. Will the credit score drop? Well, it will depend on the extent of the payment delays. If you make a late payment by a couple of days, it will not decrease your score. But if the delay is more than a month, the credit score will come down as the credit bureau will get a report from the lender by then. But ensure you pay on time by maintaining discipline in your daily routine.
Avoid Using a Credit Card Recklessly
Nowadays, it becomes convenient for anyone to get a credit card. Yes, the product is used to buy things when you don’t have a lump sum amount. But there are high chances of you defaulting on your credit card payment if you shop beyond your repayment capacity. This, if happens, will reduce your credit score and worsen your credit history. So, it is better if you use the card wisely and for the necessary stuff. Don’t wipe out more than 30% of the credit limit of your credit card. Now that 30% could translate into different numbers depending on the card limit one has. Plus, one should define the shopping limit also based on their income. This helps you pay dues on time and boosts your credit score.
Don’t Check Your Credit Score Often
Although it is advisable to check your credit score before applying, checking it frequently is not warranted. The reason is pretty simple, it lowers your credit score. Credit scores get updated in about 30-45 days from the time the credit bureau receives your repayment data from the lender. So, there’s no need to check the score so often. What you need to do is to pay your loan obligations on time and the rest will take care of itself.
Don’t Make Frequent Applications for Loans or Credit Cards
Too many requests for credit cards or loans can create a bad impression. If you apply for loans or credit cards frequently without much of a gap between the date of applications, it could create a credit-hungry impression and thus worsen your credit score. Most likely, the loan or credit card applications will get rejected. Even if the lender accepts, the loan eligibility and credit card limit will be much lower. Ensure you maintain a reasonably long gap between applications so that you won’t be perceived as credit hungry.
This is how you can be successful in maintaining a good credit history.
Benefits of Maintaining Good Credit History
Lower Interest Rates: One of the benefits of a good credit score is that you can get a loan at a lower interest rate. The score is a numerical representation of your credit history. The history will give the lender an idea of the borrower in you. And if it is good, the lender can offer lower rates on the loan.
Easy Approval: When you maintain a good credit history, lenders approve your credit card or loan request faster compared to someone struggling with a poor credit history. You just need to follow the procedure and submit the documents and the rest will be taken care of by your credit score.
High Loan Amount: You can borrow a high loan amount if your credit score is good because then it will be easier for you to get funds from a bank or NBFC.