How to Improve Credit Score in 9 Proven Ways

how to improve your credit score
how to improve your credit score

Your credit score is the most important document in your financial journey. While credit score ranges from 300 to 900 on bureaus like CRIF, CIBIL, and Experian, a good credit score is usually anything above 700. Checking your credit score report consistently is a good practice and helps you keep it in check. If you are wondering how to increase your credit score quickly, we have curated a list of ways to improve your credit score. Before that, let’s see what ranking factors affect your credit score, both positively and negatively. Here you can also check how to close credit card & how to pay credit card bill using different methods.

Ranking Factors that Increase Your Credit Score to 800

While a lot of elements usually go into determining your credit score, there are four major ranking factors that influence your credit score the most; that help you boost your credit score to where you want to take it. Here they are:

1. Credit Utilisation

Impact: up to 30%

Credit utilization is the amount of credit used compared to the credit limit approved by the credit card issuer. The credit utilization ratio is calculated by dividing your monthly credit usage by your credit limit.

2. Payment Pattern

Impact: up to 40%

With the most impact on your credit score, the payment pattern is undoubtedly the most important stat on your credit sheet. Credit score bureaus are aware of all pending payments on credit cards registered in your name. In case of delayed payment, the company tracks your record and factors it into your credit score. If you want to know how to get your credit score up, this is the most important aspect.

3. Credit History

Impact: up to 15%

Credit history is how long your credit card accounts have been active. As a general rule of thumb, the older your account, the better it is for your credit score. The credit history is for your entire credit account, and not specifically for a card.

4. New Inquiries

Impact: up to 15%

A new inquiry is when you apply for a new credit card or loan through an aggregator or bank. Whenever you submit your details and/or documents, an inquiry to the credit score bureau is made. Every such instance is counted. If you check your credit score yourself, no inquiry is counted.

Top 9 Ways to Improve Your Credit Scores

One of the biggest rules of maintaining a credit score is managing the credit utilization ratio. Consider you have a credit card with a monthly limit of Rs 1 lakh. Ideally, you should not go above the 30% spending mark, which is Rs 30,000, in this case. Even if you do go above it, make sure the instances of that happening aren’t too frequent.

1. Aim to increase total credit limit

Another trick to managing your credit utilization ratio is by increasing your total credit limit. This can be done by either asking the issuer to increase the credit limit on your existing credit cards or by getting a new card. For instance, the 30% limit on a card with Rs 1 lakh monthly limit will be Rs 30,000, while it will go up to Rs 45,000 when you get a new card with a Rs 50,000 monthly limit. The total credit limit becomes Rs 1.5 lakhs for your account.

2. Never delay a payment

The key to ensuring your credit score remains stable is not delaying even a single month’s payment. Forget not repaying it altogether, even if you go beyond the due date the credit score will likely take a massive hit. To avoid this, simply lend what you can afford to and payback how much ever is due by the due date.

3. Set reminders to not miss payments

Suppose you can afford to pay back your credit card bill but somehow forget to do so for several reasons. You can set up reminders on your calendar or use apps like CRED to keep you notified of when payment is due. This way you can avoid a hit to your credit score and any late fees.

4. Quickly repay to close off debts

If indeed you are unable to close a payment because of unforeseen circumstances, your aim should be to quickly settle off the debt and close the debt account so you can start to rebuild your lost credit score. A nifty hack for this is to convert your credit card bill into a personal loan, considering the much lower interest rates on the latter.

5. Do not close older credit card accounts

Credit history is another important factor when it comes to maintaining a healthy credit score. This means that the older your credit history, the higher will be your credit score. Thus, make sure you avoid closing your old credit card or loan accounts considering that will bring the overall age of your credit score down. Better to be

6. Keep new cards for longer

Apart from maintaining your older credit cards, make sure you also keep your new cards for a decent amount of time. How much? At least 18 to 24 months since opening the account. This shows that you are dependable with new credit cards and aren’t just using them for the purpose of revolving credit.

7. Do not make frequent new inquiries

New inquiries are another factor that affects your credit score, albeit not by much compared to others. A new inquiry happens when you apply for a new credit card or loan and the issuer sends a prompt to check your credit score. Ideally, keep it less than 2-3 instances in a quarter. If you want to check your credit score, do it through the credit bureau directly, if possible.

8. Check for inaccurate info on a credit report

Experian entitles you to 1 monthly check free of cost. In this check, you can analyze the credit cards and loans in your account, the age of your accounts, credit utilization, and more to check for inaccuracies. These can then be reported to the bureau to verify and fix if needed.

9. Keep checking your score

Much like the previous point, keep checking your score regularly to see its progress. Checking it on a monthly basis will help you analyze what leads to an uptick or a downtick. Thus, you can manage your credit report accordingly and soon become the darling of all banks!

FAQs

Can I increase my credit score?

Yes, there are several ways to increase your credit score including your credit history, credit utilisation ratio, number of accounts, and more. You can read our blog to know more about this topic.

How much time will it take to improve the CIBIL score?

It will take you around 3 months to see some updates reflect in your CIBIL score after you work on improving it.

What are 3 things you can do to improve your credit?

The three top things you can do to improve your credit score are:

1. Reduce your credit utilisation ratio to 30% of your credit limit
2. Never default on your bill payments
3. Do not close any of your older credit card accounts

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