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.

Here's the complete breakdown of the benefits of having a good credit score:

1. Easier approval of new loans and credit
A higher credit score shows lenders that you have good borrowing habits—labelling you as a low-risk borrower. This is a good thing since it makes you more trustworthy in the eyes of lenders. Thus, increasing your chances of being approved for new credit.

2. Higher credit limits or loan amounts with lower interest rates
A good credit score proves your ability to pay back your credit on time. For this reason, lenders are more willing to increase your credit limit and let you borrow a larger amount of money. Since you’ve proven to be creditworthy, you will also qualify for lower interest rates.

3. Discounted insurance rates
You’re much more likely to be offered more affordable premiums for your car or life insurance if your credit is good. Having a bad credit score, on the other hand, may result to higher premiums. We don’t want that, of course.

4. Negotiating power
Did you know you that having a good credit score can get you better deals? You can actually use it to your advantage when haggling! Utilize your credit score to prove that you’re a reliable borrower.

5. Better chances of employment
When conducting background checks, some employers take look at one’s credit score and credit report. Most of them consider good credit appealing, as it might reflect your trustworthiness and responsibility as an employee. Meanwhile, a spotty repayment history, many open and delinquent accounts, and high monthly payments can be a turn off.

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: 

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.

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.

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.

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. 

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.

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.

Ready to boost your credit score? Paying on time makes a difference! Consider a Home Credit installment plan for quick approvals and flexible payments that fit your budget.

You can also download the Home Credit Online Loan App on Play Store or App Store to find offers, manage your loans, and more!