A credit score is an important indicator from which a bank evaluates your creditworthiness, when you apply for a personal loan (such as SBI personal loan, HDFC personal loan )
The credit score prepared by CIBIL (Credit Information Bureau India Limited) is widely used by banks/NBFCs to evaluate the eligibility of a borrower for getting the best personal loan. This 3 digit number can summarize the entire credit history of a borrower and is based on information available monthly from different banks/NBFCs.
Why is it important to have a good credit score?
If you have a bad credit score you may not be able to get the personal loan approved. Even if your loan application gets approved somehow, you may be asked to pay a higher personal loan interest rate and may be offered unfavorable terms and conditions when you apply for a personal loan, as compared to those borrowers with excellent credit scores.
Here we will discuss 10 ways to improve your credit score-
- Check your credit reports for accuracy
Credit reports can have mistakes and checking these reports is the first major step towards improving your credit score. Get free copies of credit reports from the major credit bureaus and dispute credit report errors, if any.
- Continue Your Old Credit Card
Continue your old credit card, if you have paid the debts on time. It will keep your credit score healthy and you will be eligible for more credit utilization. Cheers!
- Pay off dues on time
As we discussed earlier, your payment history takes care of 35 % of the credit score. If you do not pay your dues on time, it hurts your credit score.
- Build a longer credit age
It’s difficult to improve the credit score if your credit history is short enough. One way of building a longer credit age is to cling on to the credit card of a friend/family member (as an authorized user) who has a longer credit history of timely payments.
The longer is your positive credit history; the better will be your credit score.
- Do not apply for credit accounts too often
It is imperative that you apply for a credit account only when it is absolutely necessary. Unnecessary credit can hurt your credit score as it invites too many inquiries into your credit report. It can also tempt you to accumulate debt by overspending.
- Leave open unused credit accounts
Unused credit accounts add to your available credit and leaving them open keeps your used credit amount on the lower side. This brings your credit utilization ratio down.
- Clear up collection accounts
Instead of transferring your debt to new accounts, pay it off in time. Speak to the debt collector and get a promise of non-reporting to the credit bureau in exchange for a full payment.
- Have a secured credit card
In a secured credit card, you make a deposit that secures or guarantees the line of credit extended to you from your lender. If you default on your payments, the card balance will be covered from this deposit and this late payment will not get reflected on your credit report.
- Have patience
Being patient and persistent will improve your credit score in due course. Continue paying your dues on time every month and it will repair your credit score every time.
- Get professional help
Professional resources such as AFINOZ are there to assist you. Here you will get expert assistance regarding ways to improve your credit score, at no extra cost.