Credit history is a vital requisite for any financial step you take, be it:
- acquiring a loan
- seeking employment
- looking for a rental apartment.
Your credit report will be reviewed by every lender, employer and landlord to judge your financial reputation and willingness to pay back loans. A loan can be approved or declined on the basis of your credit report. Your credit history would also determine the terms and conditions on which you obtain a loan.
Credit History: Tips to Maintaining a Good Credit History
A bad credit history report can prove detrimental to one’s future plans of purchasing a home or car or financing children’s education. Therefore, maintaining a good credit history is vital. Using credit responsibly is the best way of maintaining a good credit history. Below are some ways of conscientiously dealing with credit:
Draw credit as much as you can afford to repay – Credit cards must be used only for convenience or emergencies. You must not make purchases that are beyond your financial affordability. It is recommended that one person owns not more than two credit cards and clears all dues as soon as the monthly statement is received. This will establish your reputation as a responsible borrower. Late payments can push your credit score down.
Keep credit usage low – Never borrow credit that is close to the credit limit. Credit card companies will allow you a credit limit that is three to four times of your monthly income. If you max out the credit limit, there are chances that you will run into debts. Delay in repayments cause escalating interest rates and adversely affect your credit history and credit score. Lenders are generally cautious of borrowers who have a history of exceeding credit limits. Credit usage should always be kept to 30% of the limit to ensure affordability.
Keeping a balance – The inability to avoid carrying a balance in credit cards must be taken care of immediately. To clear the balance quickly try paying more than the minimum you have to pay each month. Avoid late payments. Try and maintain a reasonable balance level so that it does not harm your credit history.