When someone mentions the word “portfolio” in the context of finances, you may immediately think of the investments you’ve worked hard to secure throughout your life. But did you know that the concept can also apply to the collection of credit-related financial products that you have access to?
This collection, which typically includes loans and credit cards, is what you can refer to as your credit portfolio. It serves as a snapshot of your financial responsibility and showcases your ability to handle credit wisely.
Does having a list of all the credit products under your name do you any good? Yes, it actually does—in fact, a well-built credit portfolio can help you improve your credit score, which will make a big difference when you’re aiming to get approval for a loan or credit card application Philippines lenders offer.
As you’ll find out for yourself, a good credit score can help you qualify for better loan terms and open the doors to better financial opportunities. If you’re careful about how you manage the credit products that have been granted to you thus far, such as a Landers Cashback Everywhere Credit Card by Maya, you can create a financial history that works in your favor.
To that end, here’s a step-by-step guide on how to build and manage a credit portfolio:
1) Check Your Credit Standing so You Know Exactly Where to Start
Before you start building your credit portfolio, it’s important for you to know where you currently stand. A credit report, which you can obtain from accredited local credit bureaus, will duly provide a detailed picture of how you use your credit. The report presents information about your existing accounts, payment history, and any negative marks, such as late payments or defaults.
Once you have an idea of what your credit report looks like, it will be easier for you to identify how you can improve it. This, in turn, will enable you to implement targeted actions to build your credit portfolio. If you don’t have a credit history yet, don’t worry—you can start fresh by opening your first credit account with your preferred financial services provider.
2) Activate a Credit Card and Demonstrate How Responsible You Are with It
One of the simplest ways to begin building your credit portfolio is by activating a credit card. If you’re just starting out, consider applying for a secured credit card, which requires a security deposit and is easier to qualify for.
After you’ve been approved, use the card responsibly by making small purchases and paying off the balance in full each month. Using the card regularly and making on-time payments will help you establish a positive credit history and make it easier for you to expand your portfolio.
3) Take Out a Small Personal Loan to Demonstrate Your Ability to Handle Credit
When the opportunity arises, take out a personal loan. Diversifying your credit portfolio in this manner can help you demonstrate your ability to responsibly manage different types of credit. In addition, taking out a loan will add variety to your portfolio, which is something that credit scoring models favor.
Look for a small loan with manageable terms that you can repay on time. This way, you won’t have a hard time meeting your financial responsibilities with your lenders.
4) Use Credit for Everyday Purchases
To build your credit portfolio effectively, incorporate credit into your routine by using it for everyday purchases. For example, you can pay for groceries, utilities, or subscriptions with your credit card. The key is to keep your spending within your means and pay off the balance on time. Consistent usage in this way will reflect positively on your credit report and will ultimately help you maintain a healthy credit utilization ratio, which is an important factor in your credit score.
5) Pay All Your Bills on Time, and Use Digital Tools to Make It Easier
On-time payments, as you may have noticed by now, will be your ticket towards building a strong credit portfolio. The converse also applies: late or missed payments can have a significant negative impact on your credit score.
Work towards consistently paying on time to build trust with your lenders and to strengthen your credit portfolio further. If you need them, you can use digital tools to make it easier to stick to your schedule for paying dues. For example, you can set up reminders or automatic payments on your phone to ensure you never miss a due date.
6) Be Mindful of Your Credit Use and Keep Your Credit Utilization Low
Having a high credit limit is not an invitation to max it out. You’ll want to pay special attention to your credit utilization ratio, which refers to the portion of your available credit that you are currently using.
For example, if your credit card limit is PHP 10,000 and your balance is PHP 3,000, then your credit utilization is 30%. It’s best to keep it at this level, as a credit utilization ratio of less than 30% signals to lenders that you’re managing your credit wisely and that you’re not dependent on credit products to sustain your lifestyle.
7) Avoid Applying for Too Much Credit at Once
While you may want to manage multiple credit accounts in your portfolio one day, remember that applying for too much credit in a short period can raise red flags for lenders. A lender will make a hard inquiry on your credit report every time you apply for a credit product, and this can temporarily lower your credit score.
Focus on what you already have, and if you want more credit options, gradually add accounts to your portfolio over time. A measured approach like this one will show lenders that you’re not overly reliant on borrowing.
8) Build Long-Term Credit Relationships with Financial Services Providers
The length of your credit history plays a role in your credit score, so it’s beneficial for you to maintain long-term relationships with lenders. Keep your oldest credit accounts open, even if you don’t use them frequently, as they contribute to the average age of your accounts. Demonstrating consistent and responsible credit behavior over time will both strengthen your credit portfolio and solidify your reputation to your lenders as a reliable borrower.
All in all, a well-managed credit portfolio can unlock opportunities for better financial products in the future. Lenders are more likely to offer you lower interest rates, higher credit limits, and premium financial services when they see a strong credit history behind your portfolio. Take the steps outlined above to be well on your way towards building a credit portfolio that supports your financial goals and gives you access to a world of possibilities.
