• Wed. Nov 29th, 2023

What Is Your Credit Score & How Does It Work? Check Steps To Improve It

A credit score is a three-digit number that ranges from 300 to 900. (Representative image)

A credit score is a three-digit number that ranges from 300 to 900. (Representative image)

Credit Score Improvement: High credit utilisation (using a large percentage of your available credit limit) can lower your credit score.

Improving your credit score is essential for gaining access to better financial opportunities, such as loans and credit cards with favourable terms. Improving your credit score takes time and effort, but it’s worth it. There is no quick fix for improving it. It takes time and consistent effort to see results. However, by following certain tips, you can start to improve the credit score and reap the benefits that come with it.

For an easy understanding, let’s first quickly know what a credit score is.

A credit score is a three-digit number that ranges from 300 to 900, with 900 being the highest. It is calculated by credit bureaus based on your credit history, which includes information about your past borrowing and repayment behaviour. A good credit score can also help you qualify for other financial products, such as loans at lower interest rates.

Here are steps to help you improve your credit score:

Firstly, check credit report: You may obtain a copy of your credit report from any credit bureaus in India like Equifax, Experian, or TransUnion CIBIL.

Review your credit report: Carefully review your credit report for errors or discrepancies in your personal information, credit accounts, and payment history.

Pay bills on time: This is the most important factor in your credit score. Even a single late payment can have a negative impact. Consistently pay all your bills, including credit card bills, loan EMIs, and other utility bills, on time. Late payments can have a significant negative impact on your credit score.

Reduce credit card balances: Try to keep your credit card balances low. High credit utilisation (using a large percentage of your available credit limit) can lower your credit score.

Don’t apply for too many new credit: Each time you apply for credit (e.g., a new credit card or loan), it results in a hard inquiry, which can temporarily lower your score. Apply for credit only when necessary.

Don’t max out credit cards: Avoid maxing out your credit cards, as this can signal financial stress to lenders. Spread your expenses across multiple cards if necessary.

Avoid settling for less than the full amount: If you have defaulted on a loan or credit card, try to negotiate with the lender for a settlement that involves paying the full outstanding amount. Settlements can have a negative impact on your credit score.

Use credit monitoring services: Consider subscribing to credit monitoring services, as mentioned above, that provide regular updates on your credit score and report. This can help you stay informed and take corrective action as needed.

Create a budget: Develop a budget to manage your finances effectively. Knowing where your money goes can help you make timely payments and reduce debt.

If your credit situation is complex or you’re struggling to manage your debts, consider consulting a credit counsellor or financial advisor for guidance and remember that improving credit score takes time, especially if you have a history of late payments or defaults. Be patient and stay committed to good financial habits.

By admin

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