Retrospect your debt patterns to improve your credit score in 2025

Reflecting on your 2024 debt pattern is essential to understand your credit standing and how it affects your credit score.

By Sachin Seth

As we step into the new year, it’s a great opportunity to assess and improve your financial planning, especially when it comes to managing your credit. The way you handle credit can have a significant impact on your financial future. Reflecting on your 2024 debt pattern is essential to understand your credit standing and how it affects your credit score.

A credit score is a three-digit number that represents your creditworthiness, reflecting the likelihood of timely debt repayment. It offers insight into your financial behaviour and ability to manage credit responsibly. A strong credit score demonstrates reliability and trustworthiness, unlocking opportunities such as loans, credit cards, and favourable interest rates.

Lenders and financial institutions use this score to evaluate the risk of extending credit. A high score signifies responsible credit management and repayment reliability, positioning you as a preferred borrower. Conversely, a lower score may indicate difficulties in managing credit, potentially limiting the types and terms of credit available.

Maintaining a healthy credit score is crucial for enhancing financial credibility and expanding access to advantageous financial opportunities. As the new year begins, focusing on good credit habits can help you strengthen your financial profile and set the stage for long-term success.

Here’s why it’s important to focus on your credit habits as the new year begins:

Benefits of a Good Credit Score

A good credit score can significantly enhance your financial opportunities. Here are some key benefits that can help you make smarter financial decisions:

* Access to better interest rates: Lenders often offer lower interest rates to individuals with high credit scores.

* Easier approval for loans and credit cards: A high credit score increases the likelihood of getting approved for loans and credit cards, helping you access the funds you need.

* Increased negotiating power: When your credit score is high, you have more leverage to negotiate better loan terms.

* Higher credit limits: A high credit score reflects responsible credit behaviour, potentially granting you higher credit limits and increased financial flexibility.

Steps to Improve Your Credit Score Before the New Year

- Review your credit report: Regularly monitoring your credit report can help you identify any discrepancies, enabling you to take timely action and avoid potential adverse impacts on your credit score.

- Pay your EMI on time: Ensuring that you make all credit payments on time is crucial for maintaining and improving your credit score.

- Retrospect your debt patterns: Review your debt levels and expenses. By understanding your income and expenditure behaviour, you can plan your repayment better and aim to improve your credit score.

- Diversify credit mix: A balanced mix of secured and unsecured credit demonstrates responsible borrowing behaviour and positively improves your credit score.

- Avoid new hard inquiries: Limit new credit applications, as each hard inquiry can temporarily lower your score. Hard inquiries occur when lenders check credit during applications.

Setting Goals and Monitoring Progress

As the new year approaches, setting a goal to improve your credit score can be a powerful resolution, offering long-term benefits and enhancing your overall financial stability. Embracing strategies to boost your credit score offers sustaining financial benefits, making it a valuable focus for the new year and beyond.

(Sachin Seth is Chairman – CRIF High Mark and Regional MD India & South Asia CRIF.)

Views are personal and do not represent the stand of this publication.