When two strangers meet each other for the first time, they form opinions about each other based on how they look and interact. These opinions can be deceptive of their true self. First impressions may be the last, but they are not always true.
When you apply for a bank loan, you are essentially a stranger to the bank. The bank needs to verify your trustworthiness before deciding whether to issue the loan or not. How does the bank determine your trustworthiness? They check your credit score!
Your credit score tells the bank how likely you are to repay the loan. Some of the factors that influence your credit score are your repayment history, the age of your credit, how much revolving credit you use, the frequency with which you apply for a new loan or credit card, and the types of credit you own.
An excellent credit score will not only guarantee loan approval but will also offer the best possible terms on your loan. If you are wondering how to check credit score, all you need to do is enter a few details on any of the respectable sites that offer free credit report, and you will know your score in an instant. If you are not happy with your credit score, don’t worry, there are ways to improve it!
Pay Your Bills On Time
Banks and lenders consider credit score to be an indicator of the borrower’s ability to repay the debt. The best and easiest way to improve your credit score is to do exactly that.
When you make on-time payments for your monthly EMIs, credit card bills and other utility bills, it has a positive impact on your credit score.
If you tend to forget the deadlines for making payments, try setting reminders on your phone or using an app for making the payments that will keep you on track.
Reduce Your Credit Card Usage
Every time you use your credit card, your credit score gets affected a little. One of the major factors that impact your credit score is the Credit Utilisation Factor. It is the ratio of the credit that you have used to the credit that is available to you.
Every time you use your credit card, the credit utilisation factor increases. A high value of the CUF means that you are relying heavily on the credit card. Even if you so make your card payments on time, you are still in debt most of the time.
If you can make payments upfront, then do so instead of using your credit card.
Increase Your Credit Limit
Increasing your credit limit can also help you improve your credit score as it affects your CUF. If your credit card usage remains the same, but the credit limit becomes higher, your CUF will decrease.
Most of the credit card companies will inform you when you become eligible for an auto-update on your credit card limit. However, you can always be the first to contact the bank and enquire if it is possible to increase your credit limit.
Keep in mind that this is a double-edged sword. Just because you have a high credit limit does not mean that you have to borrow to the limit. Increasing your credit limit to improve your credit score only works if the limit increases while your credit card usage remains the same.
Convert Credit Card Payment To EMIs
Making regular monthly payments on time has a bigger impact on credit score than paying a lump sum in one go. Monthly EMIs are usually the result of a loan. What can you do if you do not have a loan, but still want to improve your credit score?
You can convert your credit card payment to EMIs. You can contact the credit card issuer to find out how to convert credit card payment to EMI in ICICI bank. You are still making timely payments on your credit card, but the payment has become more manageable.
You may have to pay a small interest on the bill amount to convert it to EMI.
Don’t Close Unused Credit Cards
You have a credit card that has been with for a long time, but you barely use it. It might seem better to close the credit card. As long as you don’t have to pay the annual fees, it might be a better idea to keep the card active.
An additional credit card increases the level of credit available to you. With higher available credit, your CUF decreases, thereby increasing your credit score.
The future is unpredictable and the unused card can become a lifesaver under unexpected circumstances.
Check Your Credit Report For Inaccuracies
Have you ever checked your credit report? If the answer is no, you must make it a habit to do so. Despite being uncommon, there is a chance that there are inaccuracies in your credit report that are pulling down your credit score.
You can ask for a credit report from any of the websites that offer free credit checks and then go through it carefully. This assumes even more importance if you feel that there has been an unexplainable decrease in your credit score.
If you catch it, you can approach the credit agency to rectify the mistake. It will improve your credit score significantly.
Get Different Types of Credit
Everyone has a credit card. It is the most common type of debt. However, if all you have is a credit card and no loans, then it can impact your credit score negatively.
Having multiple kinds of debts and making all the payments without fail tells the credit agency that you are a responsible borrower. It will also improve your credit score.
In Conclusion
Your credit score has a huge impact on various aspects of your life. From potential employers to landlords to lenders, everyone looks at the credit score as a way to judge your financial skills.
A poor score implies that you are not good at handling finances. An excellent score indicates that you are a responsible person. Try the tips mentioned above to improve your credit score.