7 ways to improve your credit score

By CNBCTV18.com Contributor IST (Released)


Although it is easier to establish your credit score, it is extremely important to closely monitor how you interact with your credit products, as they will have a direct impact on your credit score.

Chances are you’ve seen several articles lately in many places that mention “credit score,” but what it is, why it’s so important, and how it affects your life are topics that still lack some focus. awareness and understanding.

A credit score is a three-digit number that determines your creditworthiness. Being between 300 and 900, this is an important parameter considered by lenders who would evaluate you as a potential borrower. Just as an EKG test is an important indicator reflecting the health of your heart, a credit score is one of the most significant indicators of your financial health, as it showcases your attitude towards credit.

Your payment history has a huge influence on your credit score. This is a simple rationale – if you’re not diligent enough to pay off your loan EMIs and credit card dues, there’s a high chance you’ll default on your new loans. Thus, people with good credit ratings can seamlessly benefit from lucrative credit products ranging from loans to credit cards and are also rewarded with attractive benefits such as low interest rates and flexible tenure, among others. . Other key factors that directly influence your score include credit usage, credit history, credit mix, and new credit.

Although it is easier to establish your credit score, it is extremely important to closely monitor how you interact with your credit products, as they will have a direct impact on your credit score.

Below are some tips that can go a long way in improving and maintaining your credit score –

1. Timely refunds

Whether it’s your EMI home loan or your monthly credit card bills, timely payment is key to securing a high credit score. It is therefore in your interest to set reminders to ensure that you do not miss any of your due dates, which if done can hurt your credit score.

Another way to make sure you don’t miss your payments is to use an ECS (Electronic Clearing Service) system. An automatic bill payment from your bank’s net banking will ensure that your loan EMIs are debited directly from your account according to the mandate given to the lender. This will not only ensure timely payments, but will also ensure that your bank account has sufficient funds before the EMI date.

2. Rigorous control of the use of credit cards

If you like to splurge and exhaust your credit limit each month, you have high credit utilization (percentage of your credit limit that you have already used) and this will have a significant impact on your credit score. Using your credit card to grab the best deals and cashback is certainly rewarding, but only until you pay your dues on time. Paying the minimum amount and deferring your dues to the next month is simply not advisable as it incurs interest charges and increases your overall credit utilization, which in turn will have a big impact on your credit score.

In terms of spending, don’t limit your available credit limit at any given time and keep your outstanding balance low on all cards. The lower your credit usage, the higher your credit score.

3. Do not apply for several credit products at the same time

Each time you apply for a new loan or other credit product; banks or financial lenders will check your credit score with one or more credit bureaus. This is recorded as a “serious inquiry”, and too many of these difficult inquiries can cause your credit score to drop. Apply for multiple loans or credit cards only when absolutely necessary or urgent.

As a consumer, you can also access your credit score and credit report. This is recorded by the bureaus as a “soft inquiry” and does not affect your score. In fact, regularly checking your credit score and credit report will help you keep better track of them and take action in a timely manner.

4. Check your report regularly and report discrepancies

No matter what advanced technology is used, a system can never be perfect. It is possible that despite responsible credit behavior on your part, an error in your credit report will affect your credit score.

It is therefore extremely important to check your credit report regularly in order to locate and dispute any errors immediately. As soon as you locate a disturbance, ask the desk a question for each credit product item, track the query, and request a solution from the desk.

5. Repay your loans early

As you obtain additional funds in the form of bonuses or other income, it is advisable to prepay your term loans. This will not only reduce your debt but also increase your credit score.

6. Start Early and Keep Tracking Refunds

As a youngster, it is advisable to start building your credit history early by opting for a credit card. You can also opt for a secured card if the unsecured card is not available. Starting early will ensure that you build your credit history as you get older, which will increase your score.

7. Opt for a secure credit card

Even if you want to use a credit card but don’t get it from your bank, you should consider getting a secured credit card.

These credit cards are issued against some form of collateral, usually a fixed deposit (FD) held with the issuing bank or financial institution, and have a lower credit limit (between 75 and 110% of the amount of the guarantee).

If you have been denied a loan/card due to poor credit, a secured credit card can help build your credit rating and credit history if you carefully monitor your credit behavior.

The author, Anurag Sinha, is CEO and Founder of OneScore & OneCard

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