The Dos and Don'ts of Building a Strong Credit Score in Pakistan

A strong credit score gives you easy access to credit, helping you achieve financial stability over time. In simpler terms, you can easily obtain loans, credit cards, and other financial services with a positive credit history.

But how can you build and maintain a healthy credit score in Pakistan?

Read below to find out.

Do’s of Building a Strong Credit Score

1. Pay Dues on Time

Timely payments are crucial to maintain a healthy credit score. Clearing your credit card dues, utility bills, or loan installments on time reflects how financially responsible you are, and ultimately, makes your credit history stronger.

2. Regularly Check Your Credit Report

Your credit report contains all relevant information regarding your credit activities. Checking your report regularly can help you identify any discrepancies or fraudulent behaviours and enable you to proactively manage your credit health. Get in touch with DataCheck to review your credit report.

3. Be Careful with Credit Utilization

Credit utilization means the ratio between your current credit card balances and your total credit limit. High utilization of credit indicates financial distress and hurts your credit score. Use your credit cards with caution, ideally keeping your credit utilization ratio below 30%.

Don’ts of Building a Strong Credit Score

1. Don't Apply for Multiple Credit Cards At Once

Each time you apply for credit, lenders initiate a hard inquiry on your credit report to evaluate your creditworthiness. Hard inquiries lower your credit score and signify financial instability. Therefore, you should avoid applying for multiple credit cards within a short period of time.

2. Don't Close Your Old Credit Accounts

Length of credit history is one of the factors used in calculating your credit score. When you close an old credit card, it makes your credit history look shorter and lowers your credit score. The best practice is to keep old credit accounts open and use them occasionally to maintain a long and positive credit history.

Use old credit cards occasionally and pay off the balance to keep them active and in good standing. A longer credit history provides more data for lenders to assess your creditworthiness. It demonstrates your ability to manage credit over time.

Credit accounts that have been open and in good standing for an extended period represent a long history of responsible credit use. Closing such accounts can shorten your credit history, hurting your overall credit score. Hence, you should keep these accounts open and maintain low balances to show you are financially responsible.

3. Don’t Neglect Creating a Budget

Not setting a realistic budget often causes you to overspend, making it difficult to manage your credit. Make a budget to ensure you don’t miss any payments and utilize your credit responsibly.

Want to know your credit score? Get in touch with DataCheck Limited today.