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How To Build And Improve Credit Score?

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Credit points are an essential part of your lifestyle, be it in your home country or abroad. The credit points system is a metric that defines your financial behavior. This system derives patterns by analyzing your income and expenditure throughout the year. However, the records are registered every month, so you have to be vigilant of your spending habits and think before you spend. By referring to this guide, you will learn how to build credit in a proper manner.

It is wise to know about this information because it will not only guide your financial decisions in the future but also drive you safely during a crisis. Now, you must be wondering how can you build a credit score as a student and what are the factors of it. Well, in this guide we have covered all there is to know about how to build a credit score. All you have to do is simply read along with this guide.

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Guide to Know Credit Score

Taking credit has become a usual affair in today’s world, apart from home loans, and car loans, people are buying their mobile phones in installments nowadays. Being a student, this is the age where you have to learn to build credit. And you will be attracted to several financial schemes regarding and involving credit. Hence it is essential for you to know how this works so you can steer clear of any risky corner in your financial journey.

In order to build a credit score, you must know the ranges of the score. FICO has determined a chart that could help users understand and track their scores. The values of the chart are as given below for your reference,

  • 300 – 580 = Bad
  • 581 – 670 = Fair
  • 671 – 740 = Good
  • 741 – 800 = Very Good
  • 801 – 850 = Excellent

A credit score is determined by 5 main factors as derived by FICO. Refer to these factors to build credit properly.

  • Payment History
  • Dues Balance
  • Duration of Credit History
  • New Credits
  • Credit Types

Payment History

Your payment history is one of the most essential aspects considered in calculating your credit score. For instance, the repayments you make toward a certain debt or a loan considering the stated deadline. If you pay them on or before time, your credit score has a chance to flourish.

Whether it will or not depends on the consistency of your payments until the debt is paid off. However, if you fail to meet the deadline, irrespective of any circumstances, it will reflect on your credit score.

Dues Balance

You’ve been working hard to pay all the dues on time but that’s not enough. In order to reach a conclusion about your credit score, it is important to study the dues that are yet to pay.

Having more credit accounts opened at a time can affect your credit score negatively. So, if you’re starting to boost your credit score, keep in mind to have lesser accounts to owe.

Duration of Credit History

If your credit history goes long back, it may be a good sign. The more credit you have availed and paid off over the years, the higher your chances of you having a decent credit score. However, don’t even think of this as an easy way to build credit.

If you undertake a lot of credit, it might get tricky to pay them off all at once. Think of your credit score as a marathon and not a sprint race. Go easy, don’t speed up, and remember you have to go farther.

New Credits

If you’re applying for new credits, make sure that it is not too soon. Taking credits in short intervals of time can turn out to be a red flag. Hence, you should think twice before taking new credit. Always remember to ask yourself one thing before buying something, Is it Important or Is it Urgent? Spend only when it is the latter. If it is the former one, wait and save for that.

Credit Types

Lastly, the types of credit you’ve taken over the years also account to determine your credit score. Suppose, you have taken a Car loan, Mortgage, or educational loan, then there are three different types of credit open under your name. It is also called Credit Mix.

How to Improve Credit Score?

Build Credit

Now that you’re familiar with the background of credit, you can now imagine what could be ways to boost your credit score. It is important to keep a track of your score so that you can fix things that have gone wrong or maintain a good run.

Below, you will learn about some tips and tricks to build credit fast. Go through the below methods to learn more about the same.

  • Errors in the CIBIL report
  • Increase Credit Limit
  • Credit Inquiries
  • Don’t Use up All your Credit

Errors in the CIBIL report

It is of paramount importance for you to keep a record of your statements and credit reports to build credit. This may take a while out of your time but it will save hours in the future. Be vigilant of your CIBIL reports and connect with the concerned authorities if you find any discrepancies.

Increase Credit Limit

If you’ve got a raise or you’ve been saving more, it is important to increase your credit limit. Doing this would ensure a steady and gradual change in your credit history and can fuel your credibility.

Credit Inquires

Conducting credit inquiries frequently can be risky for your score. As mentioned earlier, refrain from taking new credits more often. If you want to purchase a certain commodity, don’t go out asking for credit, instead, practice saving and buying to build credit.

Don’t use all your Credit

Keep a habit of using only a fraction of your credit limit in a month. By the end of the month, you can pay the dues easily. This adds up to your credit score and can help you to build credit.

Thank you for referring to our blog about ‘How To Build And Improve Credit?’ If you find this post helpful, you will find these blogs interesting as well, have a look.

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How To Build And Improve Credit Score?

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