What is credit score: How to maintain a healthy credit score?


Your credit score is a vital factor when applying for loans or credit cards. But What is a credit score?

The score represents the likelihood of you paying your bills on time. It is calculated with information in your credit reports, such as payment history, the debt you have, and your credit history length. The higher the score, the better it demonstrates good credit behaviour in the past -which will make it easy for you to get loans and credit.


In this article, we share 10 tips to help you improve your credit score. 

 


1. Treat all of your debts as equal

Your credit card debt and your tradeline or installment debt both equally affect your credit score. Which is why you shouldn’t neglect small payment with low interest to prioritize your loans as having balances in your credit cards constantly can hurt your credit score. 


2. Maintain a long history with credit cards

Having a credit card with a long history can benefit you in terms of building your credit score as it enables you to have a long credit record and report- which if you maintained well will help you with your score. 


3. Fewer cards the better

People often think having a number of cards and with balances spread out is a smart choice. However, this can easily lead you to overuse them getting you into bigger trouble. According to experts, having as fewer number of cards as possible is the best strategy to improve your credit score rather than having multiple cards with balances.


4. Pay on time, every time

This is one of the simple things that you can follow to build your credit score. But not everyone keeps all their bills in order and organized and make the payments on time. Knowing your due dates and keeping track of your bills effectively can help you make your payments without any delays.  


5. Keep your balance on your credit cards as low as possible.

It’s never a wise choice to rack up your balance in your credit cards if you are to improve your credit score. People with the best credit scores use only 8% of the credit limit of their cards. So at least aim for 30% or lower when you are using yours.


6. Avoid applying for new credit whenever possible

Did you know that applying for new credit hurts your credit score? This is why you should always keep in mind to avoid new credit as much as possible unless it’s absolutely necessary. 


7. Make payments in full when possible, or at least the minimum

Paying your payment in full helps you pay off your debt fast. But if it’s only the minimum payment that you can pay make sure to make the payment always on time as late or missed payment will be on your reports for years. 


8. Communicate if you encounter problems

If you are facing a financially rough situation where your ability to pay your credit is affected, make sure to contact your creditor and explore your options for an alternative payment solution. 


9. Always take credit that you can afford

Never use credit because you have more to reach your debt limit. Always consider your monthly income and never exceed 10% of your monthly income for paying for credit or debt. 


Start following these 9 tips and build your credit score sooner than you expect it to happen.