Credit Score Tips for Young Adults: Building a Strong Financial Foundation

Credit Score Tips for Young Adults: Building a Strong Financial Foundation

Jan 25, 2024

In the journey of financial independence, understanding and maintaining a good credit score is a crucial step. For young adults, it’s the cornerstone of a strong financial foundation. Here are some tips to help you navigate this path.

Understanding Credit Score

A credit score is a numerical representation of your creditworthiness, ranging from 300-900. It’s calculated based on your credit history, including payment history, amount owed, length of credit history, new credit, and types of credit used. The higher the score, the more creditworthy you appear to potential lenders.

How is your credit score determined?

If you’re considering applying for a personal loan, it’s important to understand the factors pertaining to credit score that can influence your loan eligibility

  1. Repayment History: This refers to the consistency with which you’ve repaid your past debts. This factor accounts for ~35% of your total credit score.

  2. Credit Balance: This refers to the portion of your sanctioned credit that remains unused. The higher your credit utilization, the greater your risk of defaulting. Your credit utilization pattern contributes to around 30% of your credit score.

  3. Credit Tenure: The length of time for which you’ve availed credit and timely payment contribute to around 15% of your overall credit score.

  4. New Credits: Frequent inquiries about new loans or credit cards can negatively impact your credit score. It may give the impression that you’re overly eager to obtain substantial credits. This factor influences the credit score by a maximum of 15%.

  5. Credit Mix: The combination of secured and unsecured loans, as well as short-term and long-term credit, also plays a role in determining your credit score, contributing up to 10%.

  6. Maintain a Low Debt-to-Income Ratio: The debt-to-income ratio is a key factor that lenders consider when determining your creditworthiness. A lower ratio indicates that you have a good balance between your income and debt, which can positively impact your credit score.

How to improve your credit score?

Here are some steps you can take to improve your credit score should it fall between 300-500:

  1. Enhance Your Repayment Record: Rectify any defaults and ensure all accounts are in good standing.

  2. Lower Your Credit Utilization Ratio (CUR): Decrease your credit card outstanding. Alternatively, consider applying for secured credit card limits against your Fixed Deposits.

  3. Preserve Older Credit Card Accounts: Keep your older credit card accounts active and well-managed. You may consider closing newer accounts as it won’t affect the age of your credit history.

  4. Minimize Loan Accounts: Consider reducing the number of loan accounts you maintain by closing some of them.

  5. Balance Secured and Unsecured Loans: Strive to maintain a healthy mix between your secured and unsecured loans.

  6. No New Loan Applications: Refrain from applying for new loans until your credit score improves.

  7. Monitor Your Credit Score: Regularly track your credit score and plan your expenditure accordingly. You can get your free credit report here.


In conclusion, maintaining a healthy credit score is not just important, it’s essential for your financial well-being. It’s a key indicator of your financial health and plays a significant role in your financial decisions. Regularly monitoring your credit score can help you understand your financial standing and plan your future financial activities more effectively.

Olyv has made this process easier by offering free credit score checks. This allows you to stay informed about your credit status and take necessary actions if needed. Remember, a good credit score can open doors to better interest rates on loans, higher chances of loan approval, and more favorable financial opportunities. So, keep your credit score in check and pave the way for a secure financial future. Stay informed, stay financially healthy.