New year, new resolutions. But resolutions last only a month. Break this convention and challenge yourself to meet your credit resolutions. Here are 6 tips to meet your credit resolutions this year. Read on!
6 Simple Tips to Meet Your Credit Resolutions
Here are 6 tips to help you meet your credit resolution:
1. Make All Your Payments on Time
Payment history plays a significant role in building your credit score. Make sure to pay all your bills on time, including utility bills, EMIs, and credit card bills. Set up reminders or automate payment facilities to avoid defaulting. If you miss any payment, your credit score may reduce significantly. Thus, on-time bill payment is an effective way to maintain your creditworthiness.
2. Be Judicious in Applying for New Credit
Each time you apply for a loan, the lender performs a hard inquiry or hard credit check, which may impact your credit score. While a single application has little effect, filing multiple applications may reduce your credit score. Thus, limit your new credit applications to avoid a hit on your credit score. If you have recently applied for a loan, take some time off before making another application.
3. Keep Credit Card Balances Low
It's a misconception that carrying a balance on a credit card improves your credit score. Borrowing less is always a good idea. To maintain a healthy credit score, borrow less and keep your credit card balance low against its credit limit. This will thereby improve your credit score and reduce your credit utilisation ratio.
4. Avoid Taking Multiple Debt
This is another significant factor to improve your credit score. If you have EMIs overdue, make sure to repay those bills on priority instead of opting for a new credit card or loan. You may need to limit your credit usage if you have trouble managing multiple credit facilities. Thus, the best action will be to opt for a single loan, complete repayment, and consider borrowing if needed.
5. Check Credit Report Regularly
Checking your credit report regularly is mandatory to prevent your credit score from reducing. You may think that your credit report is always error-free. However, underlying unknown errors might result in reduced credit scores.
For example, due to some administrative errors, your repayment might not be reflected in the credit report, or your credit mix might reflect your old borrowing history. So, keep an eye on your credit report regularly and rectify errors if there are any.
Also Read - What are the Steps To Login On CIBIL Portal?
6. Maintain a Low Credit Utilisation Rate
Do not use your credit card to cover every expense. The credit utilisation ratio should be kept within 30%. Maintaining a low credit utilisation ratio will positively impact credit scores. You may also ask your lender to increase your credit limit to reach a low utilisation. Lenders may consider increasing your credit limit if you are a responsible credit card user.
Also Read - How CIBIL Score is Calculated | A Step-by-Step Guide
To Conclude
To achieve your credit resolution this year, focus on managing debt and maintaining a low credit utilisation ratio, prioritising timely EMI payments, and regularly checking credit reports. Monitoring your credit report daily will help you identify and rectify errors. You can gradually build a strong credit score if you consistently follow these tips.
