8 Ways to Improve Credit Score
Your credit score is an important indicator of your creditworthiness whenever it comes to applying for a loan. A low credit score can adversely affect your chances of getting a loan approved, and if your score is too low, your application may even be rejected immediately. If your CIBIL score is not that great and you want to improve it, you would want to know how you can achieve it. By the way, the CIBIL full form is Credit Information Bureau (India) Limited. This blog will discuss the same with you and guide you toward a stronger and better credit score.
8 Ways to Improve Credit Score
- Pay all your bills on time: Whenever lenders conduct a credit check on your credit report, they want to know how reliable you are and how responsibly you pay your bills. This is because your past payment history is generally considered an honest predictor of your future performance. Paying off all of your accounts on time every month can positively influence this credit scoring factor. Remember that your credit score can be negatively affected if you fail to pay your bills on time or settle an account for less than what you previously agreed upon.
- Clear all your unpaid dues: The second thing to keep in mind is eliminating your credit card balances. You must only spend an amount that you will be able to repay within the due date. Get rid of any unpaid loan EMIs on time, as well as those that can negatively impact your credit score. Paying off all your loan EMIs on time indicates that you are a financially responsible person and this reflects on your credit score. Moreover, it is better to opt for a limited number of credit cards to quickly check the track of repayments.
- Audit Credit Utilisation Ratio: Not only does using your credit card for all your purchases look fancy, but it also gets you some cash back or a couple of reward points. However, you should always check your credit utilization ratio and spend within the allowed limit. This practice has a positive effect on your credit score. On the other hand, crossing your credit utilization ratio brings down your credit score.
- Contact your bank: If you are going through a rough patch that is rendering you unable to pay your bills on time, don’t stay quiet. You should visit your bank and let them know about your hardships. If you have a good relationship with your bank and you provide a valid reason why you haven’t been able to pay your dues on time, they might analyse your situation and cut you some slack for deferring the payments. The bank might also consider making some adjustments so that your delayed payments won’t affect your credit score.
- Analyze for inaccuracies: Sometimes your financial behavior might not be the explanation for an unsatisfactory credit score. It is possible that there may be some errors in your credit report that have brought down your score. To eliminate the chances of this, you should check your credit score using the CIBIL score app at regular intervals so that you can point out any discrepancies and get those rectified at the right time. After verifying your details, the bank authorities will make the necessary adjustments to your credit report.
- Ask your friend or relative for help: The length of your credit history plays an important role in determining your credit score. In fact, 15% of your credit score is based on factors like the average age of all your accounts and the age of your oldest account by FICO. The older your account, the better it is for your credit score. While in some cases, you just need to sit back and let your account get old, in some other cases, you could use help from a friend who has a well-managed credit card account. If your friend adds you as a licensed user to an existing credit card, your credit history will be lengthened.
- Automate your credit card payments in the CIBIL score app: In the busy schedule of everyday life, it is common to forget to pay your bills on time. Therefore, you must automate all your credit card payments so that there is no risk of delayed payments.
- Do not abandon your old credit cards: With time, you apply for new credit cards. So, you might stop using your older and more basic cards. You might even think that because you aren’t using your old credit account, so you should close it. However, this decision can adversely affect your credit score and bring it down. This is because this act is checked by lenders and credit rating agencies, who might think that you cannot manage different types of credit cards. It is best to keep using all your credit cards and keep your CIBIL score app working even if you are performing the transaction only to keep the card operating.
Conclusion
Developing a good credit score takes time and patience. You can’t jump from a bad credit score to a good one overnight. However, by following the simple steps given in this blog, you will be able to attain a fairly decent credit score over some time.
