Is your Credit Score below 750? No worries! Just follow these simple tips and your score will soon cross the 750 mark.
Wondering what a Credit Score is? Well, it is a three-digit number, ranging between 300 and 900, that is populated based on all your credit-related financial transactions. By credit-related financial transactions, we’re referring to your Credit Card/s payments and loan EMI payments. Lenders, i.e. banks and financial institutions, look at your Credit Score before they give you Credit Cards or loans.
A Credit Score of 750+ is usually favoured by credit lenders and can fetch you easy access and great deals on financial products. What’s your score like? Haven’t checked it in a while? No issues. Check now for free in less than three minutes.
Haven’t hit the 750 mark? No worries! Just follow these steps and your score will soon cross the 750 mark.
Stop making delayed payments or missing payments
Haven’t been making your existing Credit Card or Loans payments on time? Bad, very bad! Not making payments on time or missed payments can bring down your Credit Score. And since your Credit Score reflects your ability to repay debts, a low score shows you as an unreliable individual. Lenders won’t consider you creditworthy and wouldn’t offer you credit products.
But, if you make your payments on time and without fail, not only will your Credit Score improve, but lenders will consider you a responsible borrower too. Timely payments are a good indication of your ability to handle debts responsibly.
Additional Reading: 5 Shocking Ways Your Credit Score Can Affect Your Life
Start taking your credit utilisation ratio into consideration
Credit Card user? Well, have you been keeping a tab on how much of your credit limit you’ve been using? It is pretty easy to keep swiping without any care especially when you have a decent credit limit, isn’t it? However, you should know that your credit utilisation ratio has a strong influence on your Credit Score.
Wondering what’s a credit utilisation ratio? It is basically the total amount that you owe your lenders against your total credit limit expressed as a percentage. For instance, let’s assume that you own two Credit Cards – A and B. A has a credit limit of Rs. 1,00,000 and B has a credit limit of Rs. 90,000. Now, let’s say that you have used Rs. 50,000 from A’s limit and Rs. 20,000 from B’s limit. In this case, your credit utilisation ratio will be total debt (50,000+20,000) divided by total limit (1,00,000+90,000) multiplied by 100, which comes to 36.8%. Got it?
Now, the ideal utilisation ratio is 30% to 40% of the total limit. If you’re using more than this, it’s a sign that you are overusing your cards and your Credit Score can take a hit. So, if you’re looking to improve your Credit Score, then we suggest that cut down on your credit utilisation. To be on the safe side, keep it below 30%.
Apply for credit products only on a need basis
Did you know that applying for multiple Credit Cards and Loans has a negative impact on your Credit Score? Each application is considered a hard enquiry and it lowers your Credit Score. So, we’d suggest that you do your research well and apply for a product that best suits your requirements. And, please do not apply for the same product from multiple lenders at the same time.
P.S. Checking your Credit Score is not considered a hard enquiry. So, you can check it as often as you want. All it takes is three minutes. Check now.
Don’t part with your Credit Cards
The reason why we’re are asking you not to close your Credit Cards is that you’ll lose out on the credit limit. And, therefore, your credit utilisation ratio will increase.
Let’s help you understand this with an example. Let’s say, you have two Credit Cards. Both cards have a credit limit of Rs. 1 lakh each. Now, let’s assume that your total debt stands at Rs. 60,000 and you close one of the cards. Prior to closing the account, you would have had a total limit of Rs. 2 lakhs, in which case your credit utilisation ratio would have been just 30%. But, now, after closing one of the accounts, your total limit comes down to Rs. 1 lakh, thereby increasing your utilisation ratio to 60%. Get the drift here, right?
Additional Reading: 10 Things That Don’t Affect Your Credit Score
Just so you know, your Credit Score isn’t going to improve overnight. It’s not a 100-metre race, rather it’s more like a marathon. So, please be patient. If you diligently follow the tips mentioned above, your Credit Score will soon cross the 750+ mark. And while you wait for your Credit Score to improve, care to check out a few products we offer? Just click the link below to get started.
First published in June 2019.
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