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A good credit score would ensure that your credit application is approved seamlessly. The credit score is also the key component for availing of credit at competent interest rates. Here are the do's and don’ts of maintaining a healthy credit score. 

Repayment history: 

Repayment history determines almost 30% of your credit score. Defaults on the credit card and EMI will affect your credit score negatively. 

Do: Remember to pay your credit card bills and EMI on time. 

Don’t: Don’t pay just the minimum amount. Pay the entire bill WITHIN the due date.

Tip: Financial institutions maintain a lengthy, detailed credit history. Having a long and positive credit history will have a positive impact on credit scores. 

Credit mix: 

Creating a healthy mix of secured and unsecured loans and making payments on time against the commitment of varied types builds trust among lenders. It is important to make timely payments against all types of credit availed. This, in turn, reflects positively on your credit score. 

Do: Any credit is not free money. You need to repay the principal amount along with interest over a pre-determined timeframe. 
Avail a quantum of loan that is appropriate. 

Don’t: Don’t Opt for a single credit only. Opt for a good mix of products.

Tip: The general rule is to make a down payment to the extent possible and ascertain the required loan amount. Ensure that the EMI payable on such loan amount is well within your budget.

Credit utilization rate:

Credit utilization amount, which is derived by dividing the credit limit by the amount payable, determines 25% of your credit score. 

As a general rule of thumb, a 30% credit utilization rate (CUR) is considered ideal. Exceeding the CUR could impact your credit score adversely. 

Do: Always pay the credit card bill in full. Paying partially reflects poorly on your credit score.

Don’t: Don’t default or revolve your payment. 

Tip: A revolving balance on your credit card means the portion of credit card spending that is unpaid at the end of the billing cycle. This balance can either go up or down depending on the quantum borrowed and repaid. 

Infrequent enquiries and credit score tab:

Lenders run a hard check on your credit report every time you apply for a new form of credit. Applying for credit with multiple vendors leads to frequent hard checks on your credit score. This, too, reflects badly on your credit score. 

About 20% of your credit score is determined by the number of hard enquiries on your credit score.

Do: Access your credit report and ascertain your credibility at regular intervals. 

Don’t: Don’t forget to check for discrepancies in your report or make too many enquiries when you are not fully ready to take the loan.

Tip: It is imprudent to check the credit score only for anomalies at infrequent intervals. This would also be a yardstick to ensure that you maintain a healthy score. 

Age of credit:

Age or length of credit history impacts 15% of your total credit score. Age of credit refers to the number of years that have elapsed since you first accessed credit in any form. This includes your first credit card application as well. 

The average number of years you have been holding any form of credit will be used by CIBIL to arrive at the credit score. 

Do: It is advised that you retain your old credit card instead of surrendering them, despite not using them. Closing old credit cards could lead to reduced credit scores.

Don’t: Don't forget to close older loans/ accounts that you do not use or have completed the tenure and payment.

Tip: Having a longer credit age is indicative of having good experience in handling credit. This, again, is favourable for your credit score.

Building and maintaining a credit score is essential to avail credit at competent rates. The above tips can help you build a healthy credit score.