Deciphering Credit Scores

Maintaining a Good Credit Score:

We have seen what benefits a good credit score can provide us with and hence, it is crucial to maintain it well within the top range. A bad credit score always points to insincere or undisciplined financial behavior and here are some ways to avoid that:

1. Credit Utilization Ratio: Always preserve your credit utilization ratio and maintain it in between 30%-40%. This showcases that you understand your credit limits and that you are not credit hungry.
2. Timely Payments: Pay off your credit cards bills, EMIs, and other dues on time, and consistently. 30% weightage of your credit score calculations is based on this and hence, this is the first step that you would want to take to secure a good credit score.
3. Length of your credit history: The lengthier the credit history, the better. It directly reflects on your credit behavior and it gives the concerned parties a better view of how you handle your finances. Try not to close your oldest credit cards as it will shorten your average credit age.
4. No multiple credit applications: Applying for various credit cards can prove to be a bane for your credit score. Whenever an individual applies for a loan or credit card, the applicant’s credit report is looked into by the lender (hard inquiries). This may reduce the applicant’s score by a few points.
5. Credit exposure: Credit exposure is often examined at the time of lending and it is always favorable to have a diverse credit exposure from the lender’s perspective.
   
   

The bottom line is that good credit scores really matter and they can reap colossal benefits. It is of utmost importance to know the credit facts and separate them from credit myths. Keeping your credit score in check and reviewing your credit reports twice a year is always a great practice. It takes time to build an excellent credit score but… Spoiler alert!

It is always worth it.