Your financial behavior says a lot about your credit profile and your creditworthiness. Your credit score showcases the way you have approached your financial needs and how you have maintained it. Credit score varies from 300 to 900 – it is said that the higher the score the better it is. This score indicates your creditworthiness for any future loan. A lower score might make your loan more expensive or reduce your loan eligibility or in extreme cases, may also make you ineligible for a loan. Your financial health is as important as your physical health. The good thing here too is you can improve this score by following some basic hygiene on your credit payments.
Financial products such as credit cards impact the user’s credit report. A credit card on one hand can be an effective tool to build your credit profile, whereas careless use can make things uncertain and adversely affect your credit report. Let us understand how using such financial products can affect your credit profile:
What is a credit profile?
A credit profile narrates your credit history for financial institutions and lenders. In simple terms it a credit report of your past repayment history, which is reported by credit rating agencies. These agencies basically trace your loan history, based on how much loan you availed from a lender, what type of credit you use, the length of the loan you availed for, and the most crucial point whether you paid your loan back on time or not.
Why is it important to keep a good credit profile?
Financial products like credit cards or opting for an unsecured/secure personal loan helps an individual built his or her credit profile. The user needs to be aware of his repayment date and how much credit has been availed. Not defaulting in any dues is crucial to building up a strong credit profile. This further comes handy when applying for various loans such as home loans, student loans, car loans, consumer durable loans, etc.
Judicious use of credit lines and managing your personal loan dues is extremely important for maintaining a good credit score. If you do not feel the need to buy something via credit cards, do refrain yourself from buying that product. For example, you can delay the purchase of an item not needed on an urgent basis and pay in cash instead of credit. However, if you do necessarily wish to buy it immediately, make sure that you either pay back the money to your financial institution on time or pay the installments regularly to boost your credit profile. Take a few necessary checks to maintain your financial health so that your spending patterns do not hamper your creditworthiness.
Read more: How to maintain your credit score.
Seek alternative lending sources: You can further look for alternative options like small ticket size loans or peer to peer loans to diversify your credit history. Many of these loans, like RupeeRedee, offer instant personal loans in 5 mins with minimum documentation and without any physical visits. This can prove a boon to your credit history.