Mastering the Art of Building and Maintaining Good Credit

Posted on Tuesday, August 1st, 2023 | By IndusInd Bank

Credit is one of the most important financial tools to reach your goals. It can help you achieve your dreams, such as buying a home, financing your education, or starting a business. But credit is not something that you can take for granted. You need to build and maintain a good credit history to enjoy the benefits of credit and avoid the pitfalls of debt. 

What is a good credit history? 

A good credit history is a record of how you have used credit in the past. It shows how much credit you have, how much you owe, and how well you pay your bills on time. Your credit history is reflected in your credit score, which is a number that ranges from 300 to 900. A higher score indicates a really good credit history. 

Why is a good credit history important? 

A good credit history is important because it affects your ability to borrow money and get favorable terms. Lenders and creditors use your credit history to evaluate your creditworthiness, or how likely you are to repay what you borrow. A good credit history can help you: 

• Qualify for loans and credit cards with lower interest rates and fees 
• Save money on vehicle loan at best interest rates 
• Buy your dream house  
• Start or expand a business with access to capital 

Building Your Credit Score 

Building and maintaining a good credit history is not difficult, but it requires some discipline and planning. Here are some tips to help you master the art of good credit: 

1. Start with only one credit card.  
   A credit card is one of the easiest ways to establish credit, but it can also be one of the most dangerous if you misuse it. Start with only one credit card and use it responsibly. Don’t apply for too many credit cards too soon, as this can lower your score and make you look desperate for credit. 

2. Make timely bill payments and in full.  
   The most essential factor to impact your credit score is your payment history. Paying your bills on time and in full shows that you are a reliable borrower who honors your obligations. Late or missed payments can hurt your score really bad. 

3. Keep your balance low.  
   The second most important factor in your score is your credit utilization, which is the percentage of your available credit that you are using. A good rule of thumb is to keep your utilization below 30%, but lower is better. High utilization can indicate that you are overextended and may have trouble paying back what you owe. 

4. Monitor your credit report regularly.  
   Your credit report is a detailed record of your credit history that contains information from lenders, creditors, and public records. You should check your report at least once a year to make sure it is accurate and complete. If you find any errors or discrepancies, you should dispute them as soon as possible. 

5. Deal with collections accounts.  
   If you have any unpaid debts that have been sent to collections, you should try to resolve them as soon as possible. Collections accounts can have a negative impact on your score and stay on your report for up to seven years. You can try to negotiate with the collection agency to pay less than what you owe or to remove the account from your report once you pay it off. 

6. Add to your credit mix.  
   Your credit mix is the variety of credit types that you have, such as credit cards, loans, mortgages, etc. Having a diverse credit mix can boost your score, as it shows that you can handle different kinds of credit. However, this factor has a low impact on your score, so you should not open new accounts just for the sake of it. Apply for credit when you really need it. 

These are just some important things to keep in mind to help you master the art of good credit. If you are looking for a credit card that offers world-class lifestyle benefits along with flexible rewards points, then you should consider applying for an IndusInd Bank Credit Card.  

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Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.