TomorrowMakers

Whether your credit score is low or high; these simple tips will bring you back on top and will help you strengthen your credit health over time.

Here’s how every woman can build her credit health

Even in these progressive times, it’s often the ‘man of the house’ who takes the important financial decisions – whether it’s purchasing a house or car, investing in stock, or applying for a loan. His name goes on all documents, and the woman literally has no say in the matter. When the time comes to take control of her finances, she has zilch to fall back on. No credit history, nothing. So if she wants a loan in an emergency, she’s in no position to convince the lender of her ability to repay the debt.

This makes a strong case why women need to take charge and build a good credit score. This article will not only guide you on how you can build a strong credit history but also maintain it over time.

How to build a strong credit score

Using a credit card – or cards – is the best way to improve your credit score, and is of vital importance to ensure your financial independence. Managing your credit card is a bit like taming a wild animal. To keep your expenses in check, you have to be the boss. Many are wary of holding a credit card for fear of committing financial hara-kiri, but timidity is not going to help either.

Your credit score plays a vital role in your loan application and the interest rate applicable for the disbursal, whether you’re out house-hunting, buying a car, or looking to fund a medical emergency or an educational requirement for yourself or a loved one. Typically, the lower your score, the higher your interest rate will be.

Your financial karma

There are four credit information companies in India: CIBIL, Equifax, Experian, and Highmark. They all function on a similar standard, but CIBIL is the oldest and the most widely used source.

A credit score has five major categories:

1. Credit history: Details of the last three years, including liabilities of all credit cards, loans, and mortgages. It factors how the accounts are settled, defaults, and late payments (if any).

2. Credit utilisation: How much you owe the credit card company as a total percentage of your available credit limit. If you have multiple cards, this will be an average of all lines of credit.

3. Length of credit history: The longer the better – so long as it has aged well like fine wine!

4. Credit mix: This is a composition of the loan portfolio. Besides your credit card, it includes previous personal, house, or car loans. The weightage will also depend on the category of a loan – whether secured or unsecured.

5. New credit: The number of credit applications also impacts your credit rating.

Here’s how every woman can build her credit health

Be judicious with the plastic

  • Treat your credit card like a debit card; spend within limits.
  • Ignore the credit limit offered by the company; self-impose a small credit limit that you can easily pay off every month.
  • As far as possible, avoid converting your purchases into EMIs; this could cost you interest charges and can affect your credit score.

Keep a low credit-utilization ratio

  • Just because you have it doesn’t mean you have to use it. Across credit lines, it is recommended to use less than 30% of the credit available to you.
  • Avoid having smaller spends on multiple cards. Consolidate using the balance transfer facility on your primary card. You may earn additional credit card points for this.
  • In case of unavoidable expenses, use the card that has the lowest interest cost (if you have multiple cards).

Have the right weapon of choice

  • A credit card that offers ample reward points is good. Even better if you can convert those points to offset some part of your dues.
  • Avoid having too many credit cards, especially ones offered through shopping brands.
  • If you have unused cards, do not close them. They can boost your credit score.
  • If an upgrade on your credit is available, take it. It helps reduce the credit utilization ratio.

So ladies, do not shrink from financial responsibilities. It’s time to take control of your spending habits and attain financial independence. A great credit score is half the battle won.

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