Your credit scores play a crucial role in determining your financial wellbeing. A good credit score makes it easy to secure credit. Whether you’re looking for loans at affordable interest rates or a high limit credit card, a good credit score is the first and most crucial step.
If you’re working on improving your credit score, you need to be credit savvy and NOT credit hungry. The difference between these two is a thin line. In this guide, let’s learn how to be credit savvy.
Credit Savvy Vs. Credit Hungry
In simple terms, a person who is credit savvy is a credit pro. He/she knows how to handle credit cards and loans in the best possible way to maintain an excellent credit score. Lenders love credit savvy users. It’s because they know the ins-and-outs of the credit world and are responsible with credit.
On the other hand, a credit hungry user is a person who is too hungry for credit. This person applies for too many loans or credit cards within a short span. Being credit hungry doesn’t work in your favour, and lenders are reluctant to offer loans and credit cards to individuals who exhibit credit hungry signs.
So, how do you establish yourself as a credit savvy user? In this article, the credit experts at CreditMantri share with you the positive habits of credit pros. By inculcating these habits, you can become credit savvy and ace the world of credit.
7 Positive Fiscal Habits of Credit Savvy Users
You can become a credit savvy user by inculcating these seven positive credit habits.
Habit #1: Check Credit Score and Credit Report Periodically
Credit savvy users have the habit of checking their credit scores regularly. Did you know that you can check your credit score for free at trusted sites like CreditMantri? Contrary to popular belief, checking your credit scores do NOT impact them.
It’s a good financial habit to regularly check your credit scores to know where you stand. Besides checking your credit score, we highly recommend that you check your credit report also. Reviewing your credit report periodically helps you spot any errors or mistakes in reporting. Reporting errors enables you to eliminate inaccurate information and wrong entries on your credit report, thereby boosting your credit score and making you a credit pro.
Habit #2: Apply for a Loan or Credit Card, Only after Checking Your Credit Score
Lenders rely on the credit scores of a loan/credit card applicant to determine creditworthiness. Credit savvy users are aware of the importance of credit scores in impacting loan outcomes and the loan cost. So, they make sure to review their credit score and take the right steps to improve it before applying for new credit.
Habit #3: Know the Differences between Hard and Soft Credit Inquiries
Here’s a quick overview of hard and soft inquiries if you’re hearing these terms for the first time:
- A hard inquiry happens when a potential lender pulls up your credit score and reports to evaluate your creditworthiness. Every time a hard inquiry happens, it’s noted in your credit report. Having multiple hard pulls within a short time can impact your credit score adversely.
- On the other hand, a soft inquiry happens when an individual checks his/her credit score and report. It also occurs when lenders create a list of eligible borrowers for a pre-approved loan or credit card offer. Unlike hard inquiries, soft inquiries do not impact the credit score and aren’t noted in the credit report.
Credit savvy users can understand the impacts of hard and soft inquiries on their credit report. They know that a soft inquiry doesn’t affect their credit score. So, they aren’t afraid to check their credit scores periodically.
Habit #4: Maintain a Credit Score of 750+
Yes, credit savvy users take the right measures to keep their credit scores in the excellent range. A high credit score shows that the individual is borrowing and repaying responsibly, making him a credit pro.
Paying bills on time, maintaining a mix of secured and unsecured loans, low debt-to-income ratio, being responsible with credit, avoiding multiple loan inquiries at the same time are some of the ways to improve your credit score.
Habit #5: Understand the Importance of Maintaining a Mix of Credits
Credit savvy users understand that the credit mix is one of the crucial factors deciding an individual’s credit score. Maintaining a combination of both secured credit (home loans, car loans, bike loans, etc.) and unsecured credit (personal loans, credit cards) reflects an individual’s ability to handle different credit categories responsibly. This reflects positively on the credit score.
Habit #6: Stay Away from Negative Fiscal Habits that Harm your Credit Score
Certain fiscal transactions like late credit card bill payments missed/delayed loan EMIs, maxing out credit cards, closing old credit cards, credit card cash withdrawals, etc., harm one’s credit score. Credit savvy individuals understand which transactions hurt their credit score and avoid it.
Habit #7: Use Aggregators like CreditMantri to Compare Loans and Credit Cards
Applying for a loan with multiple lenders leads to numerous hard inquiries on your credit report within a short time. To avoid this, try to space out your loan applications. The smarter solution here is to use a third-party aggregator like CreditMantri for comparing loan and credit card offers.
Instead of applying separately with each lender, use these sites to compare and evaluate loan/credit card offers. Then, zero in on the best credit offer for you and apply only with the lender you have chosen to avoid multiple hard inquiries on your credit report.
Be Credit Savvy and Unlock the Best Loan and Credit Card Offers
If you follow these habits, then pat yourselves on the back. You’re a credit pro and make smart credit decisions. If not, try to inculcate these seven positive habits to become credit savvy. Avoid rookie mistakes made by credit hungry individuals like applying for a loan with multiple lenders. Instead, be credit smart and let your credit score work in your favour.