Credit score, steps to improve Sibil score: Your credit score is an important indicator of your credit health. When reviewing your loan application, lenders refer to this score to assess your loan repayment potential.
A credit score is a three-digit number ranging from 300 to 900. It is calculated based on your credit report, which includes your payment history, credit inquiries, number of credit accounts, credit usage and the age of your accounts. A score of 300 to 600 is considered low or low, while a score of 750 to 900 is considered healthy.
A good credit rating not only increases your chances of getting a loan easily, but also allows you to negotiate better loan terms. On the other hand, a low credit score can make it difficult to get a loan. If you get one, you might have to settle for a higher interest rate.
If you’re yearning for a loan but your credit score is low, here are some steps you can take to improve it.
Check your credit report regularly
Your credit score can be low for various reasons: payment defaults, multiple credit applications, reports not updated despite paying dues, etc. Regular credit report checks can help you track errors in your credit activity, which can be reported to the appropriate credit bureau for rectification.
Pay your dues on time
Paying credit dues on time is one of the most effective ways to build a healthy credit score. You can set payment reminders on your mobile device or set standing instructions with your bank so you don’t miss payment dates. Remember that missed or late payments will affect your credit report and lower your credit score.
Control the use of your credit
The credit utilization ratio (CUR) is the ratio of the credit you are currently using to the total credit you have. Always try to maintain a CUR of 30% or less for a healthy credit rating. Keep in mind that the CUR is one of the most important factors influencing your credit score. A high CUR can indicate overspending and negatively impact your credit score.
Minimize difficult demands
When you apply for a loan or credit card, the lender or issuing company will check your credit report when reviewing your application. This request for a credit report made by the lender is called a thorough investigation. Multiple serious inquiries can indicate that you are credit hungry and negatively impact your credit score. If you’re trying to boost your credit score, avoid applying for multiple lines of credit.
Check your credit card before closing it
A low credit rating is not the end of the world. Improving your credit score is possible, although it may take time. Commit to paying your dues on time, review your spending to stay within your credit limit, and don’t miss your EMIs. A little discipline can go a long way to improving your finances.
The author is the CEO of BankBazaar.com. The opinions expressed are those of the author.