What is a credit profile, and why do you need to safeguard it? Well, a credit profile is a document that contains an individual’s credit history information. It indicates details about the use of credit by that person. Four major areas of credit profile include identification information, credit history, credit enquiries and public records of disputes if any.
The repayment history in the credit profile also directly impacts the CIBIL score. While lending money, financial institutions only consider profiles that have a good credit profile. Therefore, it becomes extremely important to safeguard your credit profile.
Here are four ways you can build a strong credit profile:
Avoid falling into a debt trap
Today a lot of institutions offer easy credit without considering your credit score. The flexibility and ease of borrowing from these online platforms increase an individual’s purchasing power. However, if you forget to pay your bills from these online lending platforms, you may end up with a bad credit profile with failed repayments. And increasing reliance on these tools for buying things can also land you into a debt trap as you were buying more than you could afford. You need to keep control over your purchasing habits and maintain financial hygiene.
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Long EMI tenure
EMI conversion is easily available when purchasing from a retail store or using a credit card. It helps you buy things easily, increasing affordability, but it also contains certain charges and fees. A longer repayment duration with EMIs can be risky, as missing out on repayment can directly affect your creditworthiness. It can result in fines and penalties, adding strain to your finances. Thus, avoid going for longer EMI tenures.
Credit card debt trap
Owning a credit card comes with its advantages, but it also means being responsible with spending. You need to make sure that you are making timely repayments every month. It keeps you from falling into a debt trap. To stay out of a credit card debt trap, make a detailed document of your repayments. Secondly, prioritize your expenditure. Purchase only those things on a credit card that are essential and not a wasteful expenditure. Lastly, make behavioural changes. If your credit card bill exceeds your monthly income, you know that you need to make cuts in your spending habits.
Don’t become a victim of identity theft
The rise in digital transactions has also given rise to identity thefts, where scamsters use your personal information to take loans, etc., which impacts your credit profile. Therefore, always make sure that you recognize a phishing scam when it’s happening to you. Always discard documents properly that contain your personal information and monitor your financial reports regularly to see there is no activity from an outsider. Remaining vigilant will help you stay away from identity theft and maintain a healthy credit profile.
Maintaining a healthy credit profile can be challenging nowadays when there are so many tools for easy credit available to you. It is only human that you may end up missing repayments because of the availability of credit on so many platforms. One way to keep track of repayments is to use an app that helps you do so and makes repayment easier. In this way, you will never forget to repay a debt, and your credit profile will always be healthy.
(By Aditya Soni, Founder and CEO of CheQ)