The state of being in complete financial good health is called ‘Credit Healthy.’ It means your social and hence emotional well-being. Financially unhealthy is equivalent to being on a bed of thorns and is certainly a heavy burden on anyone. Delaying payments, defaulting payments, over utilising credit facilities, etc. are the major factors which afflict any credit seekers. Hence, it is crucial to know how much to leverage your credit healthy facility.
Credit health begins when the lending institution or bank sends all your credit information to a credit reporting agency. Credit reporting agencies are also known as credit bureaus. They are entities who collect credit information about you and how long it has taken you to repay the debt. This information is called the ‘Credit History.’ All borrowers check with credit reporting agencies to verify your credibility before they lend to you in any form. This means, the better your credit history, the better is your chance of obtaining credit in the future.
What factors affect your credit history / record?
- Your payment history
- Amount borrowed compared to credit available
- Length of credit history or how long have you had credits
- New credit, i.e., how often you have applied for credits and how many credit requirements or inquiries have made.
- Having a healthy credit mix. An appropriate credit mix of various kinds can ensure your credibility
Having a bad credit history or rating is as good as being chronically sick and in the bed. You shun off saying I don’t want any more credit. However you need to realise that it is not only about getting more loans sanctioned, or credit cards approved. Your credit history can also affect your job prospects and another credibility in the society. It can affect what you pay your insurance premium. Your social credibility to is affected. So save yourself emotionally in the long run and have a good credit healthy history.
How to have a healthy credit history?
- Pay off your credits punctually. Do not delay in paying your monthly bills, loan instalments, etc. Late payments and collections happening from the lender can affect your credit score.
- Verify regularly your credit reports for correctness. Ensure to correct any bad record by improving your payment timelines. If you find any inaccuracies, contact the credit rating agency to and check how to get it corrected.
- Do not keep more than 35% outstanding on your credit cards. Plan your credit card spending and repayment smartly.
- Keep a track long track record of timely payment. Long term accuracy in your credit and payments adds to your credit score.
- Avoid too many credit inquiries over a short period of time. Opening too many credit accounts in a short span will mean that you are in financial difficulties, and you are direly in need of external financial support.
Whenever you inquire and open a credit account, understand the importance of credit rating and how it impacts your social standing. All it requires is a disciplined spending and repaying habit which is in-line with your income.