5 tactics you can rely on to improve your credit score

Your credit score is just as important as any other factor related to your financial profile. In some cases, it may carry more weight, especially when it comes to unsecured credit. This is because it gives lenders insight into your creditworthiness and your ability to manage your debts. For instruments such as credit cards, unsecured loans, and some secured loans, your credit score must meet the rating to get easy approval. Lenders may still accept your application if you have a low score, but you’re less likely to get great rates. This is why it is important to check your CIBIL report before applying for credit.

This helps you know your score and allows you to take corrective action if needed. In general, it’s best to have a credit score of 750 or higher. This is considered a great score and credit is much easier and more affordable. To help you build and improve your credit score to this level, follow these tactics.

Review your credit report and correct errors

One of the most effective ways to improve your credit score is to correct errors in your credit report. These often occur due to errors made by lenders or due to negligence on your part. Discrepancies with reports can be problematic and cause your score to drop until it is rectified. For example, if the credit issuer did not report a closed credit account to CIBIL, your CIBIL report will reflect this as an issue. Future lenders will take note of this and be much more careful when reviewing your applications.

So the first step should be to review your credit report and check for errors. At this point, you might also be tempted to request the removal of old disabled accounts from your report. Do not delete these accounts, especially if you have paid them in full. A consistent payment history is good for your score, and those closed accounts will be removed from the report in a few months.

Maintain the ideal credit utilization rate

Your credit utilization rate is calculated based on the credit you use compared to the total credit assigned to your profile. You must limit usage to 30% of the total limit to improve your score. Know how to immediately improve the CIBIL score. Using more than 30% suggests a greater reliance on credit for spending, which lowers your score. If you consistently go over the 30% limit, you may consider applying for a higher credit limit. This way, you can reduce the utilization rate as long as your expenses do not increase.

Avoid closing unused credit accounts

Long-standing credit accounts, even if not used, add to your score and total credit limit. As such, closing these can work against you, especially if it causes your usage rate to exceed 30%. This is why you should keep your credit accounts open, but only do so if you can comfortably afford the payments.

Repay your debts on time and avoid late payments

Repayment history is a crucial factor that affects your score and defaults will result in a penalty. Late payments will reduce your score and will continue to do so until the outstanding amount is paid in full. This is why you must pay the full amount outstanding rather than just the minimum. One way to ensure payments are made on time is to use the autopay feature offered by many credit issuers. You can set this to pay the full outstanding amount. This way your bills are paid on time, consistently. Note that you need to keep enough money in your linked account to ensure payments go through smoothly.

Have a good credit mix

When reviewing your CIBIL report, check to see if there is a healthy mix of secured and unsecured debt. It can help your credit score because it indicates that you can handle different types of credit well. Also, having too much unsecured credit can be seen as a problem.

In addition to this, it is also important to remember that improving your credit score takes time. The best way to build your score is to constantly work on it. Make your payments on time, avoid taking on too much debt, plan your borrowings and monitor your usage. Failing on just one of these fronts will negatively affect your score and can have a lasting effect on your profile. A good way to track your progress is to check your CIBIL score on Bajaj Finserv for free.

You can know your score in a few clicks and get your CIBIL report for free. You just have to follow 3 simple steps online. In addition, you do not need CIBIL login information to benefit from the service. Enter your personal information, verify your identity with the secret OTP sent to you and check your score. Armed with this tool, checking your CIBIL score is now easier than ever.

Disclaimer: This content is distributed by Bajaj Finserv. No HT journalists are involved in the creation of this content.

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