Tips To Maintain A Good Credit Score

Here are a few things that you need to keep in mind for maintaining a good credit score.

- Aniruddha Bose

If you’re like most people, your credit score might be more of an enigma to you than anything else. After all, most of us go through our financial lives on autopilot, paying scant attention to how our personal credit related-habits are impacting our creditworthiness. As a result, many of us f ind ourselves in a sticky situation when faced with an urgent and immediate need for funds, as our credit scores just don’t stack up. And although a few new-age fintech lenders do utilise alternative data points such as income tax returns (ITR), mobile bills and utility bills to underwrite loans, these platforms typically offer only short-term personal loans of much lower amounts, and with steeper interest

costs to boot. It follows, then, that consciously building a robust credit score is a crucial aspect of your personal finances. Here’s how to go about it.

What’s a Credit Score?

There are four main RBI-licensed credit bureaus in India that offer a credit score, which is really a “report card” of sorts. These are TransUnion CIBIL, Equifax, Experian and CRIF Highmark. Lenders share your credit history with these bureaus, who then spin out a monthly score on a scale of 300 to 900 basis their own internal grading mechanisms.

“A credit score of 750 shows that you have a good credit history, and banks and other financial institutions would be more likely to accept your loan and credit card application. On the contrary, a low credit score means you are a risky customer for lenders, and they will either reject your loan application or offer a higher rate of interest,” explains Radhika Binani, Chief Product Officer, Paisabazaar.com.

Moreover, having a good credit score will also bring down the cost of your loans, as you become a “preferred” customer for lenders. Hence, the importance of building a high credit score cannot be underestimated.