Have you struggled with a poor Credit Score in 2019? Here’s your chance to boost your Credit Score in 2020!
A little bit about Credit Scores
- Your Credit Score is basically a summary of your credit usage and your financial behaviour over the few years.
- A low Credit Score may be the result of not repaying your debts on time, which indicates that you are not an ideal borrower for banks.
- Most banks might not offer you loans if you have a low Credit Score.
- Generally, having a credit score of 700 or above is considered good.
- Credit information companies like CIBIL and Experian determine your Credit Score.
Is it possible to improve your Credit Score?
The answer is a resounding yes! Your Credit Score can be improved though it might take some time. In order to improve your Credit Score, you need to repay your current debts on time and in full. Remember, a less than average Credit Score is the result of an inconsistent repayment history over the years. So, the only way of improving your score is by displaying good credit repayment discipline for a long period.
Additional Reading: 5 Shocking Ways Your Credit Score Can Affect Your Life
If you are going to carry your debt burden to 2020, don’t worry coz we’ve got a 12-month plan that will help you emerge debt-free in no time! If you are ready to gain control of your finances in the new year, let’s get started!
Quarter 1: January, February, March
Checking Your Credit Reports
The first three months of the new year should be spent drafting your plan. The first step to an effective plan for boosting your Credit Score should be a clear understanding of where you stand today. Begin by checking your credit report and reviewing your financial footing with a fine-toothed comb.
Disputing Errors In Your Credit Report
After having thoroughly checked your credit report, make sure to note down any errors or questionable information that you discover. This might take some time, especially if you have a lengthy credit history.
If ignored, incorrect information in your report can continue to cause unnecessary damage to your Credit Score. If there is any suspicious or incorrect information on your credit report, begin by disputing these errors with any of the credit bureaus. Note that there’s no charge involved in disputing incorrect or dubious credit information on your report. If you prefer, you can also get in touch with a reputable credit repair company for managing the disputes on your behalf.
Automate Your Bill Payment
Missing payment deadlines is one of the primary reasons for a drop in Credit Score. To avoid missing payments on time, you can set up an automatic payment mode. This will make sure that your loan EMIs or Credit Card bills are automatically deducted from your account without you having to worry about marking the due dates on your calendar. However, make sure to never put yourself in a situation where you’re at the risk of over-drafting your checking account.
Additional Reading: 4 Ways To End 2019 On A Good Financial Note
Quarter 2: April, May, June
Take Charge Of Your Credit Card Debt
This is one of the most effective ways of boosting your Credit Score. All you need to do is keep an eye on your spending, more importantly, your Credit Card purchases. This has dual benefits – not only will you be saving more, but you can also use your savings to pay off your debt faster.
Time For A Progress Check
Periodically checking your Credit Score is crucial. This will give you an idea if your strategy in the first quarter has yielded any results. An easy way to review your progress is by analysing your credit report from time to time.
Creating New Credit
Establishing fresh and positive credit can be beneficial for you. However, remember that this is entirely dependent on your credit repayment history in the past.
A higher credit limit can boost your Credit Score more than having a lower limit. For instance, let’s say you are able to upgrade your Credit Card limit. This way, even though your debt remains the same, the credit available to you increases.
Wondering how this is beneficial to you? This is where your credit utilisation ratio comes into the picture. This ratio is the amount of credit you’re using divided by the total amount of credit you have available. Let’s assume that your credit utilisation ratio is 50%. This means that you are utilising half of the credit that is available for you. A low credit utilisation ratio, below 30%, is a good way to increase your Credit Score. Despite increasing your credit limit, if you continue to use a lower amount it would indicate that you are using your credit responsibly.
Additional Reading: Debt Control Strategies For 2020
Quarter 3: July, August, September
Track Your Progress
By the time you reach halfway through 2020, it’s a good idea to review your credit report again. Now that you’re midway through your journey, it’s time to take stock of whether your efforts at clearing off your debt and improving your Credit Score have paid off. This is also a great time to revise your strategies if there’s a need for it.
Consider Taking A Balance Transfer
It’s time for you to evaluate how much debt you still have. If your existing debt burden is still higher than 40% of your income, it can be quite difficult to achieve that shiny Credit Score above 700! If you are still struggling to pay off the debt, a Personal Loan balance transfer is a great option for paying off your loan EMIs. This loan balance transfer allows you to move your current debts such as credit card balances and existing loans to a Personal Loan with a lower interest rate. This way, you’ll not only end up paying your debts faster, but in the long run, this move will also help you save money that you would have otherwise paid off as interest.
Additional Reading: Opting For A Personal Loan Balance Transfer? Factors To Keep In Mind
Quarter 4: October, November, December
Review Your Development And Celebrate Your Victory
In the final quarter of your credit improvement plan, it’s still crucial that you review your progress. Remember that this practice of routinely checking your Credit Score is a great financial habit that you should continue in the future too. This is also time for you to check your Credit Score and celebrate the journey you have had so far!
With a year of paying your dues on time and in full, you’re sure to have come a long way. And while you raise a toast to the improved state of your finances, don’t forget to keep on following these steps till you emerge debt-free and have a solid financial footing. Even though the process of building good credit might take time, these baby steps will definitely bring you a step closer to your goal of a 700+ score.
Remember that even if you fall short of your credit goal in 2020, it doesn’t mean you haven’t been successful. With sound financial habits such as paying on time and in full, and maintaining a credit utilisation ratio below 30%, you’re sure to reach your goal soon!
Additional Reading: Here’s Your Year-End Fiscal Checklist
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