A healthy Credit and favourable Credit score probably tops the list of all those people who are planning to apply for a loan in the near future. And if you think that it is only a list of default and delayed payments on loans that can truly hurt your credit score then you are seriously mistaken. No doubt defaults, bad loans and delayed credit card payments reflect poorly on the credit score but your not-so-good spending habits might be contributing more than their share to a bad credit score. Let us help you unearth those spending errors.

No parity between Income and expenditure

This one is a simple math and is big on logic too. If you have 100 do not spend 200….not even 100. Try and limit the spend to some 50 odd bucks, if possible. Spending beyond the means of income is one sure shot way of falling into a debt trap gradually and without realising. To avoid this kind of reckless spending behaviour, start recording your daily expenditure to understand your spending habits and pattern. Trim down your expenses in the expenditure statement to derive a budget and stick to it month on month.

No savings

Your credit score not only weighs your credit status but also savings. Now if you choose to get your credit report made from any of the credit agencies or online tools, they would take into account your past payment history, financial track record, credit cards held and savings. Healthy savings can really pump up your credit score tremendously. So spend keeping in view your savings not your desires and wants.

Online payments are great

When you pay for your credit card, rentals, electricity bills and such other utility bills online, you tend to leave a digital footprint and record which is traceable. Such transactions help in building a credible financial history and favourable track record. There is a record of regular and on-time payments that can raise your credit score.

Back to back loan applications

Fishing for loans is a common practice. Whenever a loan is needed, borrowers tend to fill in multiple loan applications at various lending agencies. The aim is either to get familiar with various options available or to simply go for the first one that gets accepted! Whatever be the case, important point here is that this practice seriously hurts your credit score especially when the hunt has been on for quite some time i.e over a month or so. The best course is to read the loan documents to understand the terms and conditions and then finally apply for the once that you have shortlisted according to your requirement.

Blind use of Credit Card

Almost all experts agree that you should not use your credit card to its complete credit limit. Always leave buffer and limit the use to about 30-40% of the credit limit. If you have number of cards then spend some amount on all instead of one, if required. Just remember not to pick a new card just to divide the expenditure to maintain this 30-40% threshold on your credit cards.

Credit cards matter

Credit cards can actually help you plan and manage your finances really effectively. Look for cards that carry rewards and benefits that you are most likely to use. You would be surprised how much money can be saved through a well thought credit card. Always compare the late payment penalty and interest charges on the credit cards you are looking to pick. High interest charges can mount up your debts in no time.

Arriving and improving your credit Score

Now that we have discussed how certain spending errors tend to hurt your credit score, let us look at how Letzbank can help you arrive and improve your credit score. Our credit score tool is free and available to anyone who wishes to know his or her credit score before applying for the loan. If the score is less than favourable, then do refer to our free guide on how to improve the credit score. Apart from these tools, we also give facility of e-document locker, tax filing and various loan options right under one roof!

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