Things to Do to Build a Great Credit Score

credit score

Poor credit score can prevent an individual from getting an instant loan required for availing the best medical treatment, enjoying an international vacation, hosting a lavish wedding, and even funding home renovation. Most NBFCs depend on an applicant’s credit score for personal loan approvals. So, building a good credit score is crucial to get instant loans at the right time. 

To begin with, everything people do involving credit becomes a part of their credit history. Using the available credit responsibly is imperative to build and maintain a good credit history. Here, we recommend a few things to build a great credit score.

Borrow According to Your Repayment Capacity

Do not treat a personal loan as a permission slip to splurge on things you cannot afford otherwise. Overborrowing a loan beyond repayment capacity will increase financial trouble and get the borrower quickly into a debt trap. Building a habit of purchasing within limits is the best way to improve credit. It also showcases to future lending institutions that the individual is a responsible borrower and knows their financial limits. 

A few lending institutions like Clix Capital require 630 as the minimum credit score for personal loan. Still, it’s always good to build or improve the score to access any loan at favourable terms and conditions. Also, buying what one can afford avoids excessive debt. So, applicants should only borrow what they can pay back, even if a lending institution offers a higher loan amount. 

Before finalising a loan, reviewing income and financial obligations is the best way to foresee affordability and borrow adequately. Using a personal loan Calculator online is one of the best ways to calculate EMIs before applying for a loan. It helps to borrow wisely and repay as per budget.

Aim at Utilising Less than 30% of the Available Credit Limit

Maxing out on credit or using most of it shows irresponsibility, particularly if the borrower does not plan to clear the balance within the deadline. Credit card providers know that borrowers who use most of their available credit often face difficulty paying it back. Running up big outstanding balances also hurts the credit score. So, maintaining a low credit utilisation rate is best for building a good credit score for personal loan.

Pay Credit Balances in Full

Borrowing within your repayment capacity and selecting a tenure with affordable EMIs ensures that paying the EMIs each month on time won’t be a problem. Lending institutions check the applicant’s repayment history to see if they can pay EMIs consistently. A large part of the credit score for a personal loan depends on the timeliness of credit payments. Therefore, paying all EMIs on time helps improve the credit score gradually while avoiding debt rack up.

Handle Only One Loan at a Time

Keeping savings intact and using loans for emergencies is a good way of handling unexpected expenses but taking up too many loans simultaneously is detrimental to the credit score. Many individuals take multiple loans to cover costs rather than using their savings. The more loans you take, the more EMIs you have to pay, and the harder it becomes to keep up with their payments. 

Too many loan applications attract several hard enquiries into the credit report, which negatively affects the credit score. Notably, each query counts for around 10% of the credit score. Also, taking new loans will reduce the credit score momentarily. So, apply for new loans after proper research, and once sanctioned, handle them responsibly.

Make All Payments Before the Due Date

All the monthly payments appear on the credit report, whether you pay them or miss them. They won’t affect your credit score if you pay them before the due date. However, if the payment exceeds the due date, it reduces the rating by a few points. Suppose a borrower becomes delinquent and does not continuously pay the EMIs for several months. In that case, the lending institution sends it to the collection agency, which affects the credit score negatively and remains in the report for several years. 

Making all payments before the due date is recommended to keep them from the credit report. 


The more responsibly you handle credit, the better would be your credit score. Retain old accounts, pay balances on time, and maintain a low credit utilization rate to build good credit. While looking for urgent funds, satisfy the lending institution’s minimum credit score for personal loan requirements, get the credit you want, and handle it responsibly.

About the Author
Amaira sharma is finance expert and former business growth strategist who has more than 8+ years experience in the industry, now she helps others to get better financial stability and standards. She loves to write useful tips on personal finance and businesses.

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