Y, a young professional in her mid-twenties, was on the cusp of achieving her lifelong dream. But before she could start this exciting journey, she realised the significance of her Equifax credit score. Equifax score is an essential metric used by lenders to evaluate an individual’s credibility. Y understood her score could impact not just her potential to avail loans at favourable terms and conditions but even impact her future opportunities such as availing a 4-wheeler loan, securing a business loan for her start-up, or even placing an application for a preferred high-end credit card.
Aware of its importance, Y decided to check free credit score regularly to stay informed about her financial standing. She knew that lenders often consider factors like payment history, credit utilisation, length of credit history, and credit mix to evaluate an individual’s creditworthiness. A high credit score would demonstrate her responsible financial behaviour and make her a more attractive borrower in the eyes of potential lenders.
Reasons for checking Equifax credit score
Lenders routinely check an individual’s Equifax credit score before approving loans or credit cards. A good credit score assures lenders that Y is a responsible borrower, lowering the risk of default. This assurance leads to more significant benefits for Y, such as –
Lower interest rates
With an impressive credit score, Y could secure loans at lower interest rates. This advantage not only reduced her monthly EMI burden but also saved her significant money over the loan’s tenure.
Higher loan approvals
Y’s dream of owning her own apartment became more attainable as a good credit score increased the chances of getting her home loan approved swiftly. Lenders saw her as a reliable borrower, reducing any hesitancy in granting her the loan amount she needed.
Credit card perks
A high credit score could unlock premium credit cards with attractive rewards, cashback, and travel benefits. Y was thrilled to enjoy benefits like airport lounge access, discounts on dining and shopping, and exclusive concierge services.
Faster loan processing
Lenders prioritise applicants with good credit scores, leading to faster loan processing and disbursement. Y didn’t have to wait for weeks to get her loan sanctioned; she received approval in record time.
Favourable EMI terms
A good credit score allowed Y to negotiate better Equated Monthly Instalment (EMI) terms on her loans. She had the flexibility to choose repayment options that suited her budget, making the loan repayment journey smoother.
Higher credit limits
Y could enjoy higher credit card limits, allowing her to manage unexpected expenses or indulge in a well-deserved treat during special occasions.
Negotiating power
With a strong credit score, Y could negotiate better terms for various financial products and services. When seeking a personal loan or credit card, she had the upper hand in negotiations, ensuring she received favourable deals.
Employment opportunities
Y discovered that some employers considered credit scores during the hiring process, especially for roles that involved handling finances or sensitive information. A good score boosted Y’s chances of landing such opportunities.
Tips and strategies to improve Equifax credit score
Motivated to boost her credit score, Y implemented the following tips and strategies –
Pay bills on time
Y set up automatic bill payments to ensure she paid all her credit card bills, loan EMIs, and utility bills on or before the due date to avoid late payments. Timely payments played a significant role in her credit score improvement.
Check and monitor
Y made it a habit to check her free Equifax credit score regularly to track her progress and identify areas for improvement. She used reliable credit monitoring services to stay updated on any changes.
Reduce credit utilisation
Y kept her credit card balances low, aiming to use no more than 30 per cent of her available credit limit. She made multiple small payments throughout the month to maintain a healthy credit utilisation ratio.
Maintain a diverse credit mix
Y understood the importance of having a mix of secured and unsecured credit, such as loans and credit cards. She diversified her credit portfolio responsibly to showcase her ability to manage different types of credit.
Avoid multiple applications
Y refrained from making multiple loan or credit card applications within a short period, as it can negatively impact her credit score. She carefully researched and compared offers before applying.
Clear debts strategically
Y focused on clearing high-interest debts first, enabling her to manage her overall debt more effectively. She made extra payments towards such debts while keeping the other accounts current.
Limit new credit
Y was cautious about opening new credit accounts unless it was necessary to build a strong credit history. She understood that a sudden influx of new credit could raise concerns among lenders.
Dispute inaccuracies
Y checked her credit report regularly and raised disputes with Equifax for any inaccuracies she found. She knew that rectifying errors promptly would positively impact her credit score.
Use credit responsibly
Y used her credit cards judiciously and responsibly, avoiding unnecessary expenses. She only used credit when necessary and focused on essentials.
Set reminders
Y set reminders for bill payments to avoid overlooking any dues. She set alerts on her phone and marked important dates on her calendar to stay organised.
Maintain old accounts
Y kept her old credit accounts open, as a longer credit history can positively impact her credit score. She occasionally used her oldest credit card to maintain its positive effect on her credit profile.
Negotiate with creditors
If facing financial difficulties, Y reached out to creditors to negotiate more feasible repayment options. She didn’t shy away from discussing her situation and was proactive in finding solutions.
Enrol in credit-building programs
Y joined credit-building programs that could help enhance her credit profile. Some financial institutions in India offer such programs to guide individuals on improving their credit scores.
Limit credit inquiries
Y only authorised credit inquiries when necessary and avoided unnecessary inquiries. She carefully considered whether she genuinely needed the credit product before giving her consent.
Become an authorised user
Y requested to be added as an authorised user on a family member’s or friend’s credit card with a positive payment history. This allowed her to piggyback on their good credit behaviour.
Wrap-up
With sheer determination and adherence to these tips, Y’s Equifax credit score gradually improved over time. Her consistent efforts opened doors to better financial opportunities, and she successfully secured a home loan with favourable terms to buy her dream apartment. As she sipped her tea in her new home, Y realised that being proactive about her Equifax credit score was the key to a brighter financial future. She felt empowered and confident, knowing that she had taken control of her financial well-being.
Now, Y encourages everyone around her to start on a similar journey to financial well-being by keeping a close eye on their Equifax credit scores and employing these effective strategies to build a solid credit foundation. She has become a role model for her friends and family, advocating responsible credit behaviour and financial management for a prosperous and secure future.