7 Effective Strategies To Build A Better Credit Score
Are you worried that your credit score is low? Credit experts at CreditMantri share the best strategies to remedy a less than ideal score. Use the tips listed here to build a better credit score and land the best deals on future loans and credit cards.
What is considered a good credit score?
Credit scores range between 300 and 900. The higher the score, the better it is for your finances. Scores above 750 are considered excellent, and anything between 700 and 750 is regarded as a good score. Scores ranging from 700 to 550 are considered fair, and anything below 549 is deemed poor.
Your credit scores are based on your credit report. The credit report is a detailed summary of your credit history. Having a score of 750 helps you land the best deals on loans and credit cards. Not sure what your credit score is? You can quickly check it online at trusted sites like CreditMantri. CreditMantri gives you your latest credit score within a few minutes.
Now that you’ve checked your latest credit score for free at CreditMantri, the next step is to focus on ways to improve it. If your credit score falls in the fair or bad category, worry not. You can still rectify it. Start by understanding the various factors that impact your credit score and take responsible fiscal decisions to improve it. With responsible usage of credit and conscious creditworthy choices, you can boost your credit score over time.
Here, we share seven golden rules to help you land a better credit score.
Tip #1: Pay your Bills, EMIs on Time
Your repayment history has a massive impact on your credit score. It accounts for 35% of your credit history. You can build your credit rating by being disciplined with credit payments.
Delays in loan EMI payments and credit card bills not only cost you late fees and other penalties but also adversely affect your credit score. So, make sure that you’re disciplined when it comes to loan EMIs, credit card bills, and other payments.
If you tend to forget to pay your credit card bills or EMIs on time, you can set up reminders on your phone to alert you of due-dates. Better still, you can set up automatic payment instructions so that the amount is debited automatically from your bank account.
Tip #2: Keep your Old Credit Card Open, even if you don’t use it
The length of credit history accounts for 15% of your credit score. So, it’s an excellent strategy to maintain your old credit cards, thereby increasing your credit history’s average length. As long as you can pay your credit card bills on time, it’s a good idea to keep old credit cards open. This helps you build a strong and lengthy credit history, which in turn improves your credit score.
Tip #3: Be Aware of your Credit Limits
Your credit utilisation ratio plays a crucial role in determining your credit score. The lower you keep this ratio, the better it is for your credit score. To reduce the ratio, you need to restrict your credit usage. Frequently exhausting your credit limit hurts your credit score and brings it down.
Let’s say the credit limit on your card is Rs. 60,000 and your average monthly bill is Rs. 50,000. In this case, your credit utilisation ratio is nearly 84%, which is pretty high. One way to tackle this situation is to reduce the expenses on your credit card. But, that may not be possible always.
The better way to handle this situation is to request your credit card issuer to increase the credit limit. This way, you can reduce your credit utilisation ratio without restricting your expenses. However, keep in mind that increasing the expenses you charge on the card just because you have a bigger credit limit defeats the purpose. So, try to stick to your regular payments even on the newly increased credit limit. This brings down your credit utilisation ratio, which in turn boosts your credit score.
Tip #4: Go for a Longer Tenure when Taking a Loan
One of the biggest reasons for a low credit score is missed EMI payments. If you’re struggling to pay your loan EMIs on time, then it’s recommended that you take a longer loan. This reduces your monthly EMIs, thereby ensuring that you make loan payments on time, avoiding defaults. When you don’t delay or miss a loan EMI, your credit score improves over time.
Tip #5: Don’t Burden Yourself with Too Much Debt
Continuing with the above point, another strategy to avoid missing loan EMIs is to reduce your overall loan burden. If you take multiple loans at the same time, then you’re likely to feel overburdened with all the EMIs. So, try to limit the number of loans you take at a time to avoid crashing your credit score. Repaying a loan on time not only reduces your debt burden but also boosts your credit score. See if you can delay taking a loan and wait until you successfully repay ongoing loans before taking on additional debt.
Tip #6: Check your Credit Report for Mistakes and Rectify Them
Credit bureaus sometimes make errors when it comes to updating your credit records. Incorrect information, delayed reports can bring down your score. To rectify this, it’s highly recommended that you check your credit report periodically. We recommend that you review your credit report at least once every six months. Look for any errors or incorrect information. Report it to the dispute resolution wing of the credit bureau. You can get this done online.
You can get the latest copy of your credit report at CreditMantri by providing a few key details.
Tip #7: Don’t Be Scared of Credit
If you haven’t taken any loans or do not have a credit card, then your credit history remains blank, and as a result, your credit scores will be low. You can rectify this situation by opting for a healthy mix of credits. Take both secured and unsecured loans and repay them on time to start building your credit history. This helps to improve your credit scores over time.
Having a good credit score is always advantageous. It helps you secure loans at lower interest rates and your preferred credit card with a high credit limit. Try to include these strategies in your fiscal life and watch your credit score improve. However, keep in mind that credit scores don’t change overnight. So, give it at least six months to one year for your credit score to climb after you implement these strategies.