[Ki Ha-young's Life Card] Interest Rate Difference Up to 5 Times Depending on Credit Score... How I Manage My Credit

Up to 3 Free Credit Checks Per Year
Even Small Amounts Should Be Paid On Time
Repay Unavoidable Delinquencies Starting With the Oldest

[Asia Economy Reporter Ki Ha-young]Is there anyone these days without at least one credit card? In modern society, anyone who wants can have a card. Credit cards have brought unparalleled convenience to daily life. Now, wherever you go, you can easily see people paying with credit cards or smartphones. As demand has increased, cards with various benefits are being released almost daily. Accordingly, Asia Economy delivers various stories related to cards, which are inseparable from our consumer life, through the weekly 'Cards in Daily Life' corner, from introducing new cards to industry behind-the-scenes and guides for card beginners.

"From a minimum annual interest rate of 4.95% to a maximum of 23.5%. The interest rate is determined according to the customer's creditworthiness."

The first thing to check when using card loans or cash services is the interest rate and limit. You are probably familiar with the phrase that it is determined according to the customer's creditworthiness each time. If your credit is high, you can borrow money at a relatively low interest rate; conversely, if your credit is low, the rate will be higher. Card companies set lower rates for high-credit customers because they consider them more likely to repay the borrowed money.

Therefore, it is necessary to manage your credit by periodically checking your credit status. Currently, you can check your credit information for free up to three times a year through websites operated by credit information companies such as NICE Credit Information Service and Korea Credit Bureau. If there are errors, you can request corrections, so it is important to make good use of this. Some people mistakenly believe that checking their credit information lowers their credit score, but checking your own credit information does not affect your creditworthiness, so you can use it with confidence. Recently, fintech companies such as KakaoBank, Toss, and BankSalad also offer free credit checks, lowering the barrier to credit inquiries.

Above all, to manage credit, it is important not to delay payments even for small amounts. If you delay more than 100,000 KRW for over five business days, your credit score will drop, and even if you pay off the overdue amount at once, your credit score will not immediately improve, so you must be careful to avoid delays. Delays in loan principal and interest payments, credit card payments, as well as communication fees and utility bills, all count. To prevent delays caused by carelessness, it is advisable to use automatic payments for various bills that must be paid regularly. Also, since delays often occur when bills are not received due to moving, you must notify the relevant financial institution if your address changes.

Consistent repayment without delays is the shortcut to 'credit score improvement'

If unavoidable delays occur, you should repay the oldest overdue amounts first to minimize disadvantages caused by delays. Also, excessive use of short-term credit card loans (cash services) can negatively affect your credit score, so unnecessary cash service use should be avoided. Loan application inquiries during the screening stage at loan companies (loan execution inquiries) can also negatively impact credit scores. However, simple inquiries made to check loan eligibility on loan company websites are excluded.

On the other hand, normal credit transactions positively affect creditworthiness. For example, maintaining a proper level of loan repayment history or using credit cards without delays is more favorable for credit evaluation than having no cash transactions or transaction history. For university students or young adults with few financial transaction records, consistently submitting payment records for communication and public utility bills such as mobile phone fees can be a useful way to improve credit scores.

Since the existing credit rating system (grades 1 to 10) will change to a credit scoring system (1 to 1000 points) starting next year, how about improving the quality of financial services you can receive through consistent credit management?