6 Tips to Build a Good Credit Score for Financial Success

A credit score is a value that reflects your risk in paying off loans and credit card dues. In the Philippines, credit scores range from 300 to 850 and lenders such as banks and financial institutions like Home Credit, use your credit score to determine how likely you are to repay loans or credit in a timely manner. A low credit score means that you'll have more difficulty in applying for new loans or credit cards. If you have a good credit score, you can enjoy a higher credit limit and faster loan approvals.

Building a good credit score unlocks numerous financial opportunities and sets you up for a more secure future. It increases your chances of loan approvals, such as car loans or installment plans like Home Credit. A good score also means lower interest rates, saving you money over time. Plus, it provides access to emergency loans and better installment options for big purchases without large down payments.

In the Philippines, a score that falls within the range of 700 to 850 is considered as excellent while a credit score 650 to 699 is good. Scores below 650 are categorized as poor. If you’re interested to know how credit reporting works, a clients' credit information is sent by banks and financial institutions to the Credit Information Corporation (CIC), the country's public credit registry that manages credit data. From the credit information, the CIC creates thorough credit reports that reveal an individual's credit history. These credit records are then shared by the CIC with official lenders. 
Here are a few things you need to remember if you want to build or maintain a good credit score: 

1. Open a Bank Account

The first step to building your credit score is to open a bank account. Maintaining a bank or savings account demonstrates competent financial management to lenders. This is where your credit journey begins, since banks may offer financial products like credit cards based on your account history.

2.    Pay Your Credit Dues and Bills on Time

The most important tip in maintaining a good credit score is to pay your bills on time. Regularly paying your bills on time, whether they're utilities, rent, or phone bills, shows lenders that you can manage financial obligations. Even installment plans, like those offered by Home Credit, can help build your credit score when paid on time.

3.    Avoid Maxing Out Your Credit

Although using credit does increase your score, it's important to avoid maxing your credit limit. To show responsible use of your credit, try to maintain your balance at or below 30% of your credit limit.

4.    Avoid Applying for Too Many Credit

While having access to credit is essential for adulting such as buying a car or purchasing an appliance for your brand-new home, availing too many loans or credit cards in a short period of time can negatively affect your credit score. Lenders may view frequent applications as an indication of financial problems, so make sure to space out your credit applications, say a few months in between. 

5.    Take Small Loans 

When applying for loans, start with small ones that you can easily manage. Starting on small loans means smaller credit to pay, which improves your credit score and shows lenders that you can handle debt responsibly.

6.    Use Installment Plans Wisely

Using installment option for big purchases (like smartphones or appliances) and making timely payments can boost your credit score. Home Credit, for example, offers flexible installment plans from 9 to 36 months which can help build your credit score if paid on time.
Building a credit score takes time and discipline, but it's worth it in the long run as it opens to many financial opportunities. By opening a bank account, using a credit card responsibly, making payments on time, and considering small loans, you can establish a solid financial foundation. For Filipinos looking to make major purchases or finance big life goals, maintaining a good credit score is essential.

Installment plans such as ones offered by Home Credit can also be a practical way to start building credit as long as you make timely payments. Remember, your credit score is a testament of your financial habits—so the more responsible you are, the better your score will be!