Credit score plays an important role when an individual is applying for a credit card or loan. Credit score is a 3 digit number that reveals the creditworthiness of an individual to banks and other financial institutions. A good credit score brings a huge difference in financial life. A good credit score helps in getting better interest rates on all kinds of financing i.e. from mortgages to credit cards whereas on the other hand lower score leads to paying higher rates but can also make it difficult to qualify for a loan.
CIBIL is one of the leading credit rating agencies. CIBIL Score above 700 is considered excellent and anything lower than this will face problems in getting loans quickly. Few must try secrets to improve credit score are as follows:
Check the credit report regularly
As per the framework of the regulations, banks usually check the person’s credit score before approving the loan. Keeping a regular heck of the credit report will help you in finding the latest score at a given point. Banks usually accept a score of above 700 for loan sanction. Checking credit reports will help in taking corrective measures in case of a low score. Proper analysis of credit reports also helps in finding inaccurate and outdated information on the report.
Convert high-cost loans to EMI
The high outstanding balance on the credit card reflects poorly on the credit score. Whenever you purchase something costly that is challenging to pay the total amount then the individual can proactively get the amount converted to EMI. This will help in managing the debt and take proactive steps in moving it to cheaper alternatives. An individual can also make an inventory of existing credit card debt and try to consolidate them into one single personal loan with EMI.
Pay EMI & credit payments on Time
Missing out or delaying the payments in the past can cause trouble in the CIBIL score. Resolve to not miss a single payment due date for all future payments. You must set a reminder and make payment accordingly. Take care to pay the total amount and not the minimum amount. A much better option to deal with is by setting up a standing instruction for the loan and credit card payments and even the utility bills. By doing so, this will help in avoiding late payment fees and time is taken each time to track and make the manual payments.
Don’t be in rush to close loan with a heavy payment record
Individuals must not foreclose a loan if you have a good repayment record and wish to improve the credit score. The existence of such a loan in a credit profile improves its credibility and contributes to the overall score. In addition, this shows to the bank that you have the necessary financial capability to pay for the loans. Hence by making sure that you continue to pay the loan payment regularly.
Resist the temptation of credit shopping
Often it is observed that many investors fall for advertisements for credit card points and freebies and apply to multiple banks & financial institutions. All these applications are registered as hard enquiries in the credit information database. Your credit score can get impaired by making frequent hard inquiries across multiple banks simultaneously. One of the better options is to apply to one bank at a time. Individuals must wait for at least a month before applying to another bank.
Pay attention to credit utilization
The extent to which you use the credit benefits at the time also impacts the credit score. Individuals must stay away from making maximum payout with credit cards. Instead of using one credit card fully, an individual must choose to have two cards and have 30-40% outstanding on each card.
Don’t discard the credit card/ stop EMI payments
Often it is seen that people stop the payment of loan EMI or credit card outstanding midway due to unresolved disputes with the bank. This causes the bank to report the card or loan as settled or written off to a credit information company. A better approach is to go through the formal grievance redressal process of the bank.
Loans and credit cards are the reality of the modern financial system. A good credit score helps in the faster processing of loans.
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