Are you still struggling with a low Credit Score? Well, it’s time to put everything else aside and get this super-score the attention it deserves.
Thought your Credit Score is just a fancy number? Well, it’s time to think again. According to a CIBIL survey, 74% of Indians check their Credit Score at least twice a year. The same report, published in the Economic Times, also states, ‘While 29% of the 1002 urban consumers surveyed said that they do it primarily to improve it, 28% checked to prepare for a new Credit Card or apply for new loans.’
What Is A Credit Score?
Your Credit Score is a three-digit number that bears testimony of your creditworthiness every time you step out into the world of finance. Experts recommend a Credit Score of 700 or more to access the best quality products at affordable rates.
Additional Reading: 5 Ways To Raise Your Credit Score
How Does Credit Score Work?
Say, for instance, you are in the market for a Home Loan and after months of research, you have narrowed down on a loan offer available at 8% per annum. You have never bothered to check your Credit Score but you have a well-paying job and you are confident that banks would be eager to do business with you.
Deepak, another prospective homebuyer, has also shortlisted the same loan offer. Although his income is not as high, he pays his Credit Card bills on time. Over the years, he has made sure his
Credit Score is always in the range of 750-800.
After comparing both, the bank chooses Deepak’s application over yours.
Why? - You may ask.
While both the applications are high on intent, having a zero Credit Score is ‘sufficient cause’ to get your application rejected.
And, it’s not just Home Loans, a zero Credit Score makes it a zillion times more difficult to get a Car Loan or Personal Loan, apply for a balance transfer or even pick a Credit Card!
Additional Reading: Sure Ways To Become A Credit Score Guru
How Do You Get A High Credit Score?
If you look at your Credit Report, you will find that it majorly consists of these 5 key areas.
- Your payment history
- The amounts you owe
- The age of your credit history
- New lines of credit
- Credit mix
Improving your Credit Score is a matter of working on each of these sections systematically to ensure your credit portfolio is balanced.
Tips For Improving Your Credit Score Fast
If your Credit Score is on the wrong side of 700, don’t fret. There are a handful of things that you can do to bring it up to speed.
Get Rid Of Dues
Whether you have a massive due pending on you since time immemorial or it’s a mere fraction on your Credit Card bill that you blissfully ignored last month, dues have a way of sneaking up on your Credit Score when you least expect them to.
Keep The Balance Low
You may have heard of this term called ‘credit utilisation ratio’. If you haven’t, well, it’s nothing fancy. It merely suggests the amount of credit you are using out of the total credit allotted to you. A good credit utilisation ratio is when you are using less than 30% of the total credit limit. To lenders and rating agencies alike, a low credit utilization ratio is a sign of good financial health. It tells them you don’t have the incessant need to overspend and that you can manage your credit well.
Avoid Multiple Enquires
Every time you apply for a new line of credit, you authorise the lenders to pull up your credit report, and as they pull up the credit report, your Credit Score takes a direct hit. In order to avoid this, do not apply for multiple credit lines within a short space of time. If you have faced a rejection once, wait out at least 6 months before making a fresh application.
Additional Reading: Understanding The Mechanics of Your Credit Score
Things You Can Do With A Credit Score Of 700+
The reason why so many people are adamant about fixing their Credit Score is the sheer abundance of opportunities that often accompany a good Credit Score.
Interest rates are generally low for people with good Credit Scores, which means, you will be able to pay off the loans faster.
Higher Chances Of Approval
Whether you are applying for a Credit Card or you are looking out for a loan, the chances of rejection are significantly lower if you have a great Credit Score to vouch for you.
Premium financial products with exclusive rates and higher limits are accessible only to the ones with a high Credit Score.
Power To Negotiate
More than anything else, a high Credit Score gives you the power to negotiate for better rates and ask for flexible terms and conditions.
While you give it a go, remember that you cannot build an incredible credit history overnight. Consistency is the key to a high Credit Score. Stay focused, think long-term and you will do just fine.
Ready to take your financial planning up another notch?