Credit history is the track record of your ability to pay debts at different points of life. In other words, your credit history determines your financial condition and creditworthiness. The credit history is judged on the credit score at different periods. An increase in credit score reflects a good credit history while a decrease in credit score marks as an alarming sign for creditworthiness. A good credit history gives you the advantage of receiving lower interest rates on loans, financial approval, higher credit limits, and many more economic benefits. Thus, one should always strive to maintain a decent credit history.
Building a good credit history is just the game of increasing your credit score and maintaining a functional status for a more extended period. If you have the necessary knowledge about credit score, you can keep an excellent credit history throughout your life. Also, undergoing a good credit score check plays a significant role. You can follow some of the tips that can help to build a good credit history.
Tips on how to build a good credit history
By following the key points we can ensure you have a good credit history in the long run.
Frequent use of Credit card
Purchasing a credit card and not using it is the most stupid thing you can do. Using a credit card frequently influences your credit score, which is reflected in your credit history. There is always a provision in which you will get some bonus points while making use of your credit card, which increases your credit score. Hence, use your credit card enough to build up a good credit score and build up a good credit history.
Clear dues on time
You need to maintain low debts to sustain a good credit history. Always pay off the full balance of the credit card instead of just paying the minimum limit. Clearing up the dues of your credit card is reflected in your credit history due to a hike in your credit score.
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Maintain a balanced mix of secured and unsecured loans
One should always have a balanced blend of secured loans (such as a home loan) and unsecured loans (such as a personal loan). Having too many unsecured loans decreases your credit score and can, thus, become a negative point on your credit score. Hence, you should not take too many unsecured loans but instead avail a mixed bag of both types of investment.
Avoid touching the maximum limit on your credit card
If you start splurging and reach the maximum threshold of your credit card often, it will inevitably impact your credit history. It can be very helpful if you closely watch credit issued through your credit card to avoid spending up to the maximum limit of your credit card.
Pay EMIs on time
If you have any loan, paying EMIs on time improves your credit score. In case of any repetitive delay in paying EMI, the credit score automatically decreases, impacting your credit history. You should pay your EMIs regularly to build a good credit history.
Know your limits
Borrow only when you can afford to pay. You should be aware of your financial condition and borrow accordingly. If you borrow and do not pay, this will lead to bad credit history.
Limit/avoid application to new credits
Whenever you apply for a new loan, the bank checks your credit score. This affects your credit score negatively. If you want to maintain a good credit history, it is advisable to take credits only when necessary.
Don’t close old credit cards
As your account grows old with time, it helps in building a good credit history. If you close your credit card, the credit history linked to that account will eventually be removed by the credit bureau. This will shorten the average credit age, which will lead to a drop in your credit score and credit history.
Monitor your credit score regularly
Since credit score serves as the main parameter in credit history, it is necessary to keep an eye on it. Monitoring your credit score at a regular interval prevents you from getting any unwanted surprises. This helps you to beware of any identity theft or credit card frauds, which are very common these days. You can check your credit score in your credit report or get it online. You can also take precautions if the credit score drops. Having a good credit score is important to build up a good credit history.
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It is needless to say that these tips not only help you build a good credit history but also helps you maintain the same in the long run. Moreover, maintaining a good credit history is followed up with more opportunities in your financial life. It provides you with a lower insurance premium, reliability as a tenant, employee, and of course, as a lender.
A smart investor is the one who does a self-check. We are always here to provide you with our resource guide. Explore, Learn, and Apply the concepts. Also, incorporating and cultivating a suitable habitat will add a lot of value to your life. Savings and investment are a part of our lives, and we cannot do away without it. As a result, we can conclude that daily working on our credit scores play a vital role. The score and Credit history can act as a trust factor when it comes to taking the loans. Therefore, our main aim is to ensure a stress-free financial life for you.
Also, it is not a bad idea to consult a financial advisor. A consultation helps to get a clear overview of the things and make things sorted.
If your finances are under control, you can lead a peaceful life. We have set a health goal, a career goal. Let us kick the year 2020 by setting a goal to better our credit score and build a sharp-edged credit history. Like getting good marks and useful reports used to give us happiness in childhood, similarly having a good credit report gives us the same feeling of gratification.