- Date : 04/08/2023
- Read: 3 mins
Building a credit history and score is important because of a lot of reasons. And to find out, read on!
Getting credit cards seems like a dream, but it’s more than just buying now and paying later. The credit history and score attached to them is one example. There is no mysterious method to building a strong credit score. However, there are a few rules that can help. In this article, we will focus on managing credit history and answer all your questions!
- Why does credit history matter and how to manage financial behaviour?
- Understanding the benefits of a good credit score and FICO rating.
- Ways to improve credit score by basic financial etiquette.
What is Credit History?
A person's credit history is a record of how they handled money and debt, such as credit card accounts and other loans.
As individuals utilise a monetary item and pay their month-to-month balances, the loan specialist might report insights regarding account movement to credit departments.
When you apply for credit of any kind, lenders typically check your credit report. To stay informed about their credit history, individuals can also periodically access their own credit reports, which are called soft checks.
How to Improve your Credit Score?
Creating a strong credit history is the foundation of financial freedom and spending power. Even then, to establish, improve credit score and demonstrate a solid credit history that lenders take seriously can be challenging for young professionals.
- Understanding how credit bureaus work is essential to building a solid credit history. Your credit score is heavily influenced by credit card debt. If you build sound and professional financial behaviour, then your credit history will reflect that.
- While having credit is significant, it's similarly essential to judiciously utilise it. Be careful not to rack up too much debt that you can't afford to pay back. Instead of using credit as a means of living beyond your means, use it to build a positive credit history.
- Soft inquiries, like checking your credit, employer checks, existing financial institutions, and credit card companies for pre-approved offers, don't affect your credit score. However, hard inquiries from applying for new credit, such as credit cards or loans, can impact your score.
How to Increase Credit Score?
You ought to set updates for your instalments and be focused on credit. Your repayment of outstanding debt can extensively affect your FICO rating. Instalment delays for EMIs compel you to deal with the consequences in addition to lowering your FICO rating.
To build a good credit score, it's better to have a good mix of long- and short-term unsecured loans like credit cards and personal loans, and secured loans like auto loans and home loans. There may be negative perceptions of too many unsecured loans.
You can get loans and credit with better terms if you have a good credit score. It expands your possibilities of endorsement and can result in lower loan costs. Furthermore, for young professionals, it’s even more important to secure their future, while also learning budgeting.