Maintaining a healthy credit profile means using credit within limit and paying dues on time. This improves your chances of getting better loans in the future.
A credit profile is a document with information about a person’s or a business’s credit history. A credit report indicates how an individual or an enterprise has used or is using credit. In the credit profile, four major areas are covered—identifying information, credit history, public records regarding disputes and credit enquiries.
Lending institutions prefer good credit profiles with timely repayment history. A good credit profile also puts a business in good stead for raising necessary capital from lending institutions. An individual gets the same advantages in the form of loans with lower interest rate and faster turnaround time in disbursal. “The negotiation power of a borrower with good credit profile is higher than of a person who has a weaker credit profile. Therefore, maintaining a good credit profile is a must for anyone for sound financial future,” says Sanjeev Dahiwadkar, founder and CEO, Moringa Techsolv, a software product company in the regulatory compliance technology space.
Steps To Maintain A Healthy Credit Profile
Good financial habits are key to maintaining a healthy credit profile. What can you do? Among other things, avoid late payments, maintain a good mix of credit and don’t exhaust the credit limits available on credit cards.
“One shouldn’t try to borrow frequently and have frequent enquiries. This will affect the credit profile negatively. Keep the credit utilisation healthy with a balance between secured and unsecured loans. If anyone has co-signed a loan, monitor it regularly,” adds Dahiwadkar.
Be careful about accessing credit with low credit utilisation ratio. Limit the number of credit facilities you have across the different financial institutions. “Timely payment and regular monitoring of credit scores will go a long way in ensuring an improved credit profile over time,” says Dahiwadkar.
Apart from not applying for loans or credit cards frequently, avoid applying for accounts that you may not need. If you have too many cards, pick one or two and close the others. Consolidate your spending on the selected cards.
A healthy credit profile stems from healthy financial habits. Spending within one’s means, keeping expenses low and tracking them are some ways to build a healthy financial future. Have clearly-defined financial goals. This will help you save with discipline and manage expenses accordingly.