Part of adulting is realising just how much your credit score impacts everything. Sounds almost ridiculous at times that a three-digit number might decide whether or not you can get that home loan or not. But what exactly goes into a credit score? Well, to put it quite simply, it is a summary of your financial habits that takes into account various factors like how many credit cards you have, how quickly you pay off the credit card bills, whether you have been granted loans in the past, and whether you paid off the loans on time or not.
Some call it a summary of financial health, but that is a bit inaccurate to say since it is a summary of your history with lines of credit; it is essentially a score that keeps track of your creditworthiness.
A high credit score means you’re more likely to get a loan with more generous terms, like lower interest rates, while a lower score means you’re less likely to receive a line of credit. In the rare chance that you do, you may have to pay higher interest rates. However, there are ways to build your credit score. Let’s discuss them.
How To Build Your Credit Score?
The first step would be to find out what your actual credit score is. You can do this through the CIBIL website. CIBIL is India’s largest and leading credit information bureau and keeps the credit scores for millions of citizens as well as companies. Alternatively, you might make use of a ‘credit health app.”
Once you know your credit score, you can go about improving it. But how do you improve it, you might ask? There are several ways for credit score improvement, but the basic premise is discipline. You need to pay off your credit card bills on time, clear your existing debt, and avoid overspending on credit. That is a good starting point, but you need to do this consistently for it to reflect in your credit score.
There are even several apps that will help you get started on this journey, provide you with reminders and help you keep your spending under control. To find such an app, simply use the app store and look for apps with the keywords “personal finance India”
A UPI finance app can help build your credit score by giving you access to credit products such as UPI credit / BNPL (Buy Now Pay Later) or short-term loans. Repaying these loans will help build your credit score by inches.
Conclusion
It is important to remember that improving your credit score is a game of patience, determination, and consistency. You need to ensure that you are consistent in your financial habits; clear your credit card debt, make sure you have paid your bills on time, and don’t have any pending credit.
If you live within your means and if you apply these three rules to your spending habits, you can build your score. Once your credit score is in a healthy range, you can go about applying for loans as well as unsecured credit cards.