South Koreans Advised on Credit Score Management: Avoid Late Payments, Manage Card Limits

Maintaining a healthy credit score is paramount in South Korea, with experts emphasizing that even minor late payments can significantly impact one's financial standing. Credit scores, ranging from 1 to 1,000, are calculated by credit rating agencies like NICE and KCB and influence loan approvals, limits, and interest rates. The shift to a score-based system in 2021 replaced the previous grade-based system.

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The most important principle recommended by experts is 'never be late, even with small amounts.'

A primary piece of advice from financial professionals is to "never be late, even with small amounts." This includes timely payments for credit card bills, loan interest, and even telecommunication fees. If a payment is overdue by five business days or more and exceeds 100,000 won, financial institutions report this delinquency to credit rating agencies, and the record persists for a considerable period, even after the debt is settled.

Equally important is building a consistent history of credit transactions. Contrary to the belief that avoiding loans is beneficial, experts note that a lack of credit activity can disadvantage individuals, particularly young adults entering the workforce. Credit scoring considers not only timely repayment but also the duration of credit history, current debt burden, and the way credit cards and debit cards are used. Those with very limited credit histories, known as 'thin filers,' may face challenges in credit assessments.

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If the delinquency period is 5 business days or more and the amount is 100,000 won or more, the financial company sends the delinquency information to the credit rating company.

When using credit cards, the focus should be on responsible usage rather than the number of cards held. Experts recommend keeping credit card utilization below 40-50% of the available limit. Similarly, it is advisable not to max out lines of credit, such as overdraft accounts. Consistent, on-time payments for both credit card and debit card usage contribute positively to credit scores.

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It is as important to build a steady credit transaction history as it is to avoid delinquency.

For individuals with insufficient financial transaction history, leveraging non-financial information can be a viable strategy. Submitting proof of payments for national pension contributions, health insurance premiums, utility bills, and public fees to credit rating agencies can help supplement their credit profile. While features like 'credit score boosting' are available on financial apps, they primarily serve to compensate for a lack of financial history rather than offering a rapid increase in scores.

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Experts recommend using the card within 40-50% of the card limit.