Maintaining a high credit score, preferably over 750, is crucial for securing favourable credit terms. It also helps ensure easy approval of credit cards, personal loans, home loans, and other similar credit lines.
Building and sustaining a reputable credit score requires patience, discipline, and a well-drafted long-term plan backed by sound financial practices.
Sarika Shetty, Co-founder & CEO, RentenPe, says, “To maintain a high credit score, one needs long-term commitment. Pay your EMIs and credit card bills timely, keep credit utilisation below 25% of your credit limit, diversify credit types into secured and unsecured credits, retain old credit accounts and avoid unnecessary credit enquiries. These will help build a longer credit history. Also, check the credit report periodically, and manage the growth of credit accounts to build the desired financial success.”
Keeping the above factors in mind, here are five ways that any borrower can inculcate in their daily lives to ensure that they maintain a high credit score:
I. Focus on timely payments
When an applicant submits a new personal loan or credit card application, the issuing bank always checks the individual’s past repayment history. The bank uses this information to decide whether funds are to be lent and whether the applicant is a ‘credible’ borrower. That is why payment history gains immense importance in credit score calculations.
This makes on-time payments of credit card bills, personal loan EMIs, home loan EMIs, and similar loans critical. Submitting payments before the due date can help preserve a strong credit score.
That is why you should always focus on making timely payments and setting up automatic debits to ensure no pending payment is missed. You can also use this method to boost your creditworthiness and keep your credit profile healthy.
II. Manage credit utilisation prudently
Credit utilisation ratio is nothing but the proportion of credit used against the total limit. This simple ratio has a very intense impact on credit scores. You should focus on keeping your credit utilisation ratio below 30%. This signals responsible borrowing.
For example, if your credit card limit is ₹2,00,000, you should never use more than ₹60,000 of this limit. This way, you keep a tab on your credit utilisation ratio. It also showcases lenders’ responsible borrowing and less dependence on debt to meet day-to-day expenses. Overextending this threshold may indicate reliance on credit and bring down scores. Consistently monitoring and adjusting spending ensures borrowers are able to maintain a proper balance.
III. Diversify credit types and space applications
A fairly good mix of secured loans, such as home or auto loans and unsecured credit, such as credit cards, reflects financial stability. If a borrower has held on to such loans and consistently repaid them over the years, then this is an extremely positive sign for lenders.
Furthermore, multiple hard inquiries in a short period of time signal risk and can even result in rejection of new applications and drops in credit scores. That is why, apart from managing several credit lines responsibly, one should also be careful not to apply for several loans or credit cards within a short period of time.
IV. Keep older credit accounts active
The length of credit history influences credit scores positively. This means the longer the credit history of an individual, the better it is for their overall credit profile. For example, if you have used a credit card for decades without defaulting or missing payments and due dates, then this is a very healthy sign.
This will give lenders confidence in your ability to obtain new loans or credit cards in the future. That is why professionals always advise borrowers to keep their older credit accounts active. On the other hand, closing out old accounts shortens this history and can even bring down credit scores.
V. Monitor credit reports regularly
To keep your overall credit score high and your credit profile healthy, you should consistently monitor and check your credit report regularly.
Basic credit score range
| Score range | Credit rating | Loan approval chances |
|---|---|---|
| 750 – 900 | Excellent | Very high |
| 700 – 749 | Good | High |
| 650 – 699 | Fair | Moderate |
| 600 – 649 | Low | Low |
| Below 600 | Poor | Very low |
Note: The credit score range discussed above is illustrative. For complete details, contact your respective credit bureau.
Key points to keep in mind to maintain a high credit score
- Always pay credit card bills and EMIs on time.
- Keep the credit utilisation ratio under 30%.
- Maintain a balanced credit portfolio with secured and unsecured loans.
- Avoid multiple loan applications in a short period of time.
- Try to keep old credit accounts active to extend credit history.
Consistently following these strategies can help consumers maintain a strong credit score. A high credit score comforts lenders and provides borrowers with easier loan terms.
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Disclaimer: Mint has a tie-up with fintechs to provide credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. Mint does not promote or encourage taking credit as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
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