Maintaining a good Credit Score requires discipline and bad repayment habits can cost you dearly in the long run. Not so long ago, Rahul’s Credit Score ranged between the late 500s and early 600s and that’s when he saw his loan application being rejected. He then consulted a financial advisor to understand how Credit Score works and what he could do to improve it.
So here’s what Rahul got to know about ways to improve his Credit Score! This could work well for you too.
What is Credit Score?
Credit Score is basically your report card for credit usage and the points show your financial behaviour over the few years.
If you have a low Credit Score, it means that you have not been repaying your debts on time and this indicates that you are not an ideal borrower for banks.
Most banks might not offer you loans if you have a bad Credit Score.
Generally, having a credit score of 700 or above is considered to be good.
Credit information companies likeCIBIL determine your credit score
Good news. The answer is yes! Your Credit Score can be improved though it might take some time.In order to improve your Credit Score, you need to repay your current debts on time every time.
Remember, bad Credit Score is a result of bad repayment history over the years. So the only way of improving your score is by displaying good credit repayment discipline for a long period.
Tips to improve your Credit Score
Periodic repayment: Well, in the past, your Credit Score may have taken a hit since you did not repay your debts and Credit Card bills on time. Forget the past and start paying all your bills on time from now onwards. The longer your timely loan repayment history, the better will be your Credit Score.
Pay your bills in full: Have you been paying only the minimum amount due on your Credit Card bills? Change your habit right away if you wish to improve your Credit Score. It is necessary to pay your entire Credit Card bill every time before the due date.
Don’t close old accounts: Did you know that old Credit Cards with good repayment history are a boon to improve your Credit Score? Yes, they prove that you have been using a Credit Card for a long time and are good at paying your EMIs on time. If you randomly close your long-running Credit Card accounts, it may adversely affect your Credit Score.
Don’t apply for new cards frequently: If you thought all those new Credit Cards in your wallet make it look stylish, think again! They show you may be credit hungry which is not good. Ensure you use Credit Cards only when they are absolutely necessary and don’t keep applying for new ones unless you really need them.
Don’t foreclose loans: If you think that paying the entire loan amount at a single instance is good and will increase your Credit Score, you are mistaken. Home Loans and Car Loans reflect positively on your Credit Score if you have paid all the EMIs on time. Even if you have excess money, it may not be prudent to foreclose a loan if you really want to improve your Credit Score. You’d like to show you have a good repayment history.
Boost your card limit: Well, the Credit Card limit also has an impact on your Credit Score. If you have a low credit limit on your card and use most of it, that shows you are spending recklessly. On the contrary, if you increase your credit limit and use a lower amount it would bolster your Credit Score.
Do not shift debts: One of the common misconceptions about improving Credit Score is that if you transfer your debts from one Credit Card to another, it might help. Well, that’s not the case at all and it’s better to pay your debts instead of simply shifting them.
Extra EMIs to boost score: If you feel confident that you can pay a couple of extra EMIs after handling your current monthly expenditure, you can apply for a Personal Loan which would again boost the score.
These simple steps worked for Rahul and helped him improve his Credit Score. Why not try them too and see the difference in your Credit Score?
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In just a few hours, you can set due-date alerts for bills, so you know when a bill is coming up. Paying your bills on time Is one of the most important steps in improving your credit score. Pay down your credit card balances to keep your overall credit use low.
Try paying debts and maintaining your credit utilisation ratio of 30% or below. There are two ways through which you can pay off your debts, which are as follows: Start paying off older accounts from lowest to highest outstanding balances. Start paying off based on the highest to lowest rate of interest.
As someone with a 650 credit score, you are firmly in the “fair” territory of credit. You can usually qualify for financial products like a mortgage or car loan, but you will likely pay higher interest rates than someone with a better credit score. The "good" credit range starts at 690.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
Yes, it is possible to pay someone to help fix your credit. These individuals or companies are known as credit repair companies and they specialize in helping individuals improve their credit score.
The credit score required and other eligibility factors for buying a car vary by lender and loan terms. Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian.
It all depends on your unique situation and the specific actions you're taking to improve your credit. Realistically, you probably won't see your credit score increase by more than 10 points in a month.
What's in my FICO® Scores? FICO Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).
Introduction: My name is Tish Haag, I am a excited, delightful, curious, beautiful, agreeable, enchanting, fancy person who loves writing and wants to share my knowledge and understanding with you.
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