How to build good credit in the Philippines

Credit is a great financial tool which will enable you to reach big life goals including house purchase, automobile purchase, or business startup. To use credit, nevertheless, you must have a decent credit score in the Philippines. Better financial possibilities can arise from knowing how credit operates and from responsible management of it.

What is credit score?

To produce your credit score, accredited credit bureaus such as TransUnion and Credit Information Corporation (CIC) credit report are gathered by using information from banks and financial institutions. Important elements affecting your score consist include:

  • Payment history (35%) – Making regular payments increases your score; late or missed payments have the opposite effect.
  • Credit utilization ratio (30%) - Keeping your credit card balances low in relation to your available credit limit will help you to raise your score.
  • Credit history length: (15%) – Better still is the length of your history of sensible credit use.
  • Credit account types (10%) – Combining credit cards, loans, and other credit types will help your score to be stronger.
  • Credit inquiries (10%) - Applying for too many cards or loans in a short period can damage your credit.

How to Build Good Credit Score Philippines

If you are underbanked, or do not have a lot of experience with credit, it can be difficult to build a good credit score. However, it is not impossible. Here are a few tips to help you get started.

  1. Get a credit card. This is the most crucial action you can do to establish a credit history. When using a credit card, make sure you:
    • Pay your bill in full and on time each month to avoid interest charges.
    • Keep your credit utilization ratio below 30% to show responsible credit usage.
  2. Keep your credit utilization low. The amount of credit you are utilizing relative to the quantity of credit you have accessible is your credit usage. Maintaining a credit usage less than thirty percent is a wise concept. You can accomplish this by monthly credit card balance pay-down.
  3. Pay your bills on time. Your credit score mostly relies on your payment history. Pay your bills on time always, including:
    • Payments made with credit cards
    • Utility costs including water, power, internet, mobile phone contracts.
    • Loan payments
    • Payments on mortgages or rents
    • Late payments could cause extra costs and damage your credit report.
  4. Steer clear of too ambitious credit application. Applying for a credit card or loan will cause a hard inquiry of your credit record. Multiple credit accounts application could damage your creditworthiness.
  5. Get a copy of your credit report and review it for errors. You are entitled to a free copy of your credit report from each of the three major credit bureaus once a year. Review your credit report for any errors, such as accounts that are not yours or late payments that you did not make. Dispute any errors with the credit bureau.

Though it takes work and time, developing good credit is well worth it. Approval for credit cards and loans at reduced interest rates will depend on your credit score. This will help you reach your financial goals and avoid interest payment expenses.

Additional tips to help you build good credit

  • Use a secured credit card. Those without credit history or poor credit might choose a secured credit card. Using a secured credit card, you make a deposit utilized as your credit limit. Over time, this kind of card that's offered by a lot of credit card companies might help you develop a good payment record and raise your credit score.
  • Consider getting a cosigner. If you have a negative credit history and is having difficulty getting approved for a loan or credit card on your own, you can ask a cosigner to help you. A cosigner is someone who has good credit and agrees to be responsible for the loan or credit card if you default on the payments.
  • Be patient. It takes time to build good credit. Don't expect to see a significant improvement in your credit score overnight. Just keep using credit responsibly and paying your bills on time, and your credit score will gradually improve.
  • Explore Loan Options in the Philippines. Responsible loan management can also improve your credit score. Compare different loan options in the Philippines to find the best interest rates and repayment terms. Some personal loans or installment plans can contribute to building your credit if paid on time.

Why Building Good Credit Matters

Credit scores are used by financial institutions more and more to decide eligibility for different financial products as digital banking and credit score monitoring in the Philippines become more easily available. Nowadays, a good credit score will enable you:

  • Lower interest rate secure loans
  • Approved for additional credit limits
  • Count toward special credit card rewards and benefits.
  • Value quicker loan approval procedures.

Final Thoughts

Though it takes time and work, getting a strong credit score in the Philippines will pay off. Strong financial foundation can be obtained via responsible credit use, timely payment schedule, and low debt load maintenance. Start modest today and gradually you will open more financial possibilities and more mental peace of mind.