Tips To Improve Your Credit Score

Maintaining a good Credit Score requires discipline and bad repayment habits can cost you dearly in the long run. Not so long ago, Rahul’s Credit Score ranged between the late 500s and early 600s and that’s when he saw his loan application being rejected. He then consulted a financial advisor to understand how Credit Score works and what he could do to improve it.

So here’s what Rahul got to know about ways to improve his Credit Score! This could work well for you too.

What is Credit Score?

Credit Score is basically your report card for credit usage and the points show your financial behaviour over the few years.

• If you have a low Credit Score, it means that you have not been repaying your debts on time and this indicates that you are not an ideal borrower for banks.
• Most banks might not offer you loans if you have a bad Credit Score.
• Generally, having a credit score of 700 or above is considered to be good.
• Credit information companies like CIBIL determine your credit score

Can Credit Score be improved?

Good news. The answer is 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 every time.

Remember, bad Credit Score is a result of bad repayment history over the years. So the only way of improving your score is by displaying good credit repayment discipline for a long period.

Tips to improve your Credit Score

1. Periodic repayment: Well, in the past, your Credit Score may have taken a hit since you did not repay your debts and Credit Card bills on time. Forget the past and start paying all your bills on time from now onwards. The longer your timely loan repayment history,  the better will be your Credit Score.
2. Pay your bills in full: Have you been paying only the minimum amount due on your Credit Card bills? Change your habit right away if you wish to improve your Credit Score. It is necessary to pay your entire Credit Card bill every time before the due date.
3. Don’t close old accounts: Did you know that old Credit Cards with good repayment history are a boon to improve your Credit Score? Yes, they prove that you have been using a Credit Card for a long time and are good at paying your EMIs on time. If you randomly close your long-running Credit Card accounts, it may adversely affect your Credit Score.
4. Don’t apply for new cards frequently: If you thought all those new Credit Cards in your wallet make it look stylish, think again! They show you may be credit hungry which is not good. Ensure you use Credit Cards only when they are absolutely necessary and don’t keep applying for new ones unless you really need them.
5. Don’t foreclose loans: If you think that paying the entire loan amount at a single instance is good and will increase your Credit Score, you are mistaken. Home Loans and Car Loans reflect positively on your Credit Score if you have paid all the EMIs on time. Even if you have excess money, it may not be prudent to foreclose a loan if you really want to improve your Credit Score. You’d like to show you have a good repayment history.
6. Boost your card limit: Well, the Credit Card limit also has an impact on your Credit Score. If you have a low credit limit on your card and use most of it, that shows you are spending recklessly. On the contrary, if you increase your credit limit and use a lower amount it would bolster your Credit Score.
7. Do not shift debts: One of the common misconceptions about improving Credit Score is that if you transfer your debts from one Credit Card to another, it might help. Well, that’s not the case at all and it’s better to pay your debts instead of simply shifting them.
8. Extra EMIs to boost score: If you feel confident that you can pay a couple of extra EMIs after handling your current monthly expenditure, you can apply for a Personal Loan which would again boost the score.

These simple steps worked for Rahul and helped him improve his Credit Score. Why not try them too and see the difference in your Credit Score?

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