How to build a sustainable credit score that lasts a lifetime?

Credit score: As you must be aware credit score is an important element of fund raising. Whenever someone wants to raise a loan, banks invariably check the credit score of applicant to ensure their creditworthiness. A high credit score (above 720) means the applicant is trustworthy and the lender can comfortably offer huge amount of loan on convenient terms.

Conversely, someone with a poor credit score is offered loan at a high rate of interest. Now if you want to build a credit score to let it last a lifestime, these are some of the steps you can take.

Steps to build a sustainable score

Establish credit report: You may commence with a secured credit card or become a user of a family member's credit card. These indicate positive activity without high risk. Try to use it lightly and pay in full monthly.

Pay bills on time: One of the biggest factors is payment history. You could set up autopay or reminders to avoid even late payment. It can stay on your report for a few years. And even if you can't pay in full, at least pay the minimum.

Credit utilisation: Try to keep credit utilisation under 30 percent of your available credit (ideally 30% or less). You should request credit limit increases on old accounts to boost available credit without new inquiries.

Diversify your credit mix: You could include a variety of accounts such as credit cards, auto loans, or mortgages. However remember that you should not force this — take only what you can manage responsibly.

New applications: Each hard inquiry can harm your score temporarily. Therefore, you should apply only when it is necessary and space them out.

To make your score last a lifetime, you must follow consistency over perfection.

These are some tips 

Monitor regularly: You must monitor your credit report regularly i.e., every six months or so.

Build a long history: Try to keep your old accounts open, even if they are unused, as they lengthen your average account age.

Avoid debt traps: You must try to steer clear of high-interest debt so that you do not fall into any debt trap.

Life changes: Last but not the least, when there is a job loss, you could communicate with your bank for hardship programs (if any).

Disclaimer: Mint has a tie-up with fintechs for providing 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 score. 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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