Credit Score – A simple 3-digit number is crucial in determining your loan eligibility; your loan amount & interest rates are greatly determined by this number. Your credit score ranges between 300 – 900 and a score of 700 and above is considered ideal to get the best loans. If you learn that you have a bad credit score, don’t worry. There are legit ways to improve your credit score. It may take some time but is surely doable.
What Are The Reasons For Bad Credit Score?
Your credit score is based on your credit management; like repaying dues on time, not borrowing more than what you can repay, not having different kinds of credit, ignoring errors and mistakes in your credit report, and more. Your credit score basically indicates your fiscal prudence and lenders favour borrowers with a high credit score. They don’t want to lend to a person who cannot repay the loan properly. We can call credit score the risk mitigation measure for lenders.
Credit score is still a novel idea in India and not many borrowers are familiar with the impact it has on their lending options. If most of the urban populace is still learning about credit score, the rural population is way behind in the knowledge of credit reports, credit bureaus and how they shape the lending industry.
Only when a loan application is rejected, due to a bad credit score, do most applicants learn this term and look into it. We want to change that. We want to share some insights on how one can improve their credit score.
1. Make sure you don’t miss any payments
Your payment history is one of the most crucial components of your credit report. It monitors how promptly you pay your bills and make EMI installments. It is not a good sign if you have a history of late payments on your credit report. Repayment on time boosts your credit score and establishes a positive reputation. As a result, ensure all of your invoices and EMIs are paid on time.
2. Pay down your credit card balances in full
Your credit score may suffer if you don’t keep track of your credit card debt. Experts recommend that credit card debt be kept to a maximum of 30% of total debt. This allows you to pay your monthly commitments more conveniently and avoid late or defaulted payments.
3. Don’t apply for too many credit cards at once
Multiple credit requests in a short period of time will have a long-term negative impact on your credit record. Borrowers should perform careful study on the loan to take out, taking advantage of the plethora of information accessible online, to avoid several harsh inquiries on their credit. If you carefully manage your existing obligations, your credit score can increase within three months of the last hard inquiry.
4. Maintain a balanced credit mix
Your credit “mix,” which refers to the various types of credit you have on your report, accounts for about 10% of your credit score. When your credit report just contains one sort of credit, such as credit cards, your credit score is likely to suffer as a result of the missing data.
A healthy credit mix can include a credit card, a student loan, a home loan, and a line of credit, among other things. This credit diversity demonstrates to lenders that you can effectively handle a variety of credit types.
5. Review your credit report for any inaccuracies and correct them.
Check your credit score regularly. If you discover an error on your credit report, you must correct it right away and then follow up to ensure that it has been corrected. If you don’t repair the mistake, it will stay on your credit report, potentially reducing your credit score.
Request an investigation with the credit bureau that issued the inaccurate report. Notify the lender who provided erroneous information to the credit bureau that you are disputing the information.
6. Have any negative remarks on your credit report removed
For example, collection accounts and late payments can stay on your credit record for up to seven years after the initial delinquency. Pay your bills on time and keep your credit card balances low to keep your credit score in good shape. While removing bad entries from your credit report is tough, paying off your bills is a good idea, both in terms of reducing your overall debt and demonstrating your capacity to repay your commitments.
7. Don’t close down old, unused credit cards
Even if we want to pay off our credit card debt, it’s better to keep old credit cards active by making small purchases. Credit cards raise your credit limit overall. You will forfeit your credit limit if you cancel them. As a result, it’s advisable to keep them going by making regular purchases and keeping them active.
8. Don’t be afraid to seek professional assistance if you need it
The final straw is realizing you need help but not being able to get it. It’s better to admit you’re in over your head and seek medical assistance. A variety of credit repair businesses can assist you with your bills. They’ll collaborate with your lender to find a solution. They can also assist you in managing your finances in order to repay the loan. It is worthwhile to compensate them when they are skilled at what they do.
It’s not the end of the world if you have a low credit score. It’s merely a tiny stumbling block in your money management that you can quickly overcome. Just remember that you can always seek professional help to improve your credit score and get quick loan approvals.