Five resolutions you must follow to raise your credit score in 2024

When it comes to credit-building, a disciplined approach in repayments and credit-consumption can go a long way, says Adhil Shetty, the CEO of BankBazaar.com.

Credit Card to Bank Transfer: Transfer money from your credit card to your bank account while managing associated costs and risks.

Money Transfer from Credit Card to Bank Account: Here's how to transfer money from credit card to bank account while managing associated costs and risks. (Source: Freepik)

With a strong credit score being widely regarded as symbol of a financially responsible individual, it is also a powerful tool at a time when borrowing costs are rising.

Building and maintaining a good credit score requires work. Once achieved, it can open a world of possibilities for you, financially. Here’s a look at some financial resolutions that can effectively help you raise your credit score this New Year.

Avoid making partial payments on credit cards

If you have a credit card that you use regularly, make sure to pay your bills in full. Credit card companies do allow holders to make partial payments, typically 5% of the outstanding amount, towards their monthly dues to keep the card active. However, doing this means your unpaid dues will accumulate on which interest and late fees will be levied. This will lead to a bigger debt and unpaid dues can lower your credit score. Thus, avoid making partial payments on your credit card to maintain a healthy score.

Automate bill payments to never miss a due date

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If you have multiple credit cards in use, it can be difficult keeping track of payment dates at times. One effective and easy way to overcome that issue is to automate payments for various credit card bills. By making payments on time, you can avoid the late payment and interest charges. Not only will this prevent your debts from rising but also help you maintain a healthy credit score.

Take only the amount of credit you need

Borrowing in today’s times is much easier. Applying for credit and receiving is has become easier with numerous types of credit products now available. However, credit, at the end of the day, is a debt. There may be times when borrowing may be necessary, such as in an emergency or for a big-ticket expense. To avoid taking on unnecessary debt, assess your needs before applying for credit. Also, assess your repayment capacity, and financial situation before taking on additional credit. Having multiple lines of credit can reflect poorly on your money management and lower your credit score. By taking credit selectively, you can keep your debts under control and maintain your credit score.

Build an emergency fund

In times of a financial emergency, immediate access to funds can be a life saver. While applying for credit is an option, it may be advisable to build an emergency you can dip into during such situations. The biggest benefit of an emergency fund is that it gives you access to funds almost immediately while a line of credit may require approval before it is available to you. Having an emergency fund will help eliminate the need for credit, and thus, help you keep your debts in check.

Stick to the credit utilisation ratio

Utilising credit responsibly can do wonders for your credit score and overall financial well-being. If you’re a regular credit card user, one of the most effective ways to do so is to keep a credit utilisation ratio of 30% or below. Credit Utilisation Ratio (CUR) is the percentage of revolving credit you have used from your total credit limit and has a direct bearing on your credit score. A low CUR indicates that you manage credit responsibly, which is viewed favourably by lenders. Make and stick to a budget for your monthly expenses that you charge to your credit card to maintain a low CUR. This will help you build your credit health.

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When it comes to credit-building, a disciplined approach in repayments and credit-consumption can go a long way. These effective resolutions are excellent first steps you can integrate in your journey towards building a strong financial foundation for the years to come.

Adhil Shetty is the CEO of BankBazaar.com