To be precise, having a good credit score puts you in the good books of the financial institutions. The bank looks up to you as a responsible borrower and considers you as a valuable customer. You can get an attractive interest rate on your personal loan or get your credit card application approved quickly if you have a good score.
If you are new to the financial sector, you may want to set a good credit score and maintain that to enjoy all the privileges it provides. The initial step towards building a credit score is getting a credit card, make purchases using it, and paying your bills on time.
You can get a basic credit card by providing income proof. Use the card for your transactions and pay back the utilised sum on time. This punctuality in payments will take you a long way. It shows banks and financial institutions that you are trustworthy in terms of finances. This will help you build a credit history, and in turn, a credit score.
If you are new to credit cards, you can start building your credit history with a basic card that has no annual fee or that includes a lower finance charge.
With such a card, you don’t have to pay a hefty annual fee. With a low interest rate card, you can save on your repayments.
For example, you can choose the BSN Classic Credit Card where annual fee is waived for life and the finance charges start at 11% p.a. for government employees. Also, Citi Simplicity+ Credit Card comes with a low annual income requirement, no annual fee, no over limit fee, and no late payment fee making it ideal for someone who is just starting out.
You can build your credit history by using any sort of credit facilities, such as a personal loan or home loan. Secured loans also play a vital role in building your credit history. In secured loans, you have to pledge a property or an FD (fixed deposit) certificate to borrow money. The bank gets assured of the fact that you won’t skip the loan repayments.
Also, the number of credit facilities you are currently handling matters to build up your score. If you are paying the credit card bills, personal loan instalments, and home loan instalments all at the same time, it denotes that you are good at handling your finances well. This will reflect on your credit score in a bright way. A mere 14% of your score depends on the types of credit facilities you are handling currently.
A score of 697 and above is considered to be a good credit score that qualifies you for a new credit as per the credit service agency—CTOS. The score represents your current credit status and provides banks with the information to discrete if you are eligible for a credit facility or not.
Here is a list of things you must take care of so that your score does not come down.
No matter what credit facility you handle, 45% of the credit score is determined based on your repayment history. So, try and pay back your monthly instalments within the stipulated due date. This will help you get a decent credit score and manage your finances as well.