Your credit score plays an important factor in determining your eligibility for a loan, a credit card, and other credit products. Credit Score is calculated using your credit history and consists of information related to your payments history, the total number of loans or credit cards used by you, etc. The four major Credit Information Companies in India include CIBIL, Experian, Equifax, and Highmark.
A high credit score improves the chances of getting a loan or credit card while a low score negatively impacts your score. Banks don’t prefer giving loans or credit cards to people having low scores because they don’t trust them with their money. Despite having a low score, if you get a card or loan, then you will get a low credit limit or end up paying a very high rate of interest. If you also want to Fix Your Credit Score then read out this blog which describes credit score and ways to improve it in detail.
What is a Credit Score?
A credit score is a numerical rating representing your creditworthiness. The score is calculated based on your credit history, payment behavior, and other financial activities and is used to calculate a consumer’s creditworthiness. Generally, a credit score is between 300 - 850; the higher the score, the better a borrower can eye to potential lenders.
The users having a score of almost 900 will have better chances of loan applications being approved while a score between 300 and 549 will be considered a bad credit score. Try to get at least 750 as your credit score to enjoy the best loan and credit card offers.
A credit score is calculated after considering different factors including the total number of open accounts, total levels of debt, and repayment history, among other factors. The score is used to evaluate the individual’s probability to repay loans on time.
How to Improve Your Credit Score
Boosting or fixing your credit score helps qualify for better interest rates on loans, credit cards, and other financial products. Some of the ways by which you can improve your overall credit score include:
Check your Credit Report- One of the most crucial things to do to fix your credit score is to check your credit report. Doing this helps identify the errors in your report. In case there are some mistakes in the report, you need to get it rectified at the earliest. Make sure that the report is free from errors as your credit score will be calculated based on the information provided in the credit report.
Pay bills on time: If you have any outstanding credit card bills or loans, pay them off immediately to improve your score a bit. Payment history is one of the most crucial factors which is considered while calculating the credit score. The users with a history of delayed payments will have a low score. Avoid paying only the minimum amount due on your credit card always as it will end up increasing the outstanding balance of your card. Make an attempt to pay the full bill to keep the outstanding amount low.
Increase your credit line: If you have credit card accounts, you can call and inquire about a credit increase. If you have good standing, you will get an increase in your credit limit. However, don’t spend this amount so that you maintain a lower credit utilization rate.
Don’t close a credit card account: If you are not using a certain credit card, you can stop using it rather than closing the account. Based on the age and credit limit of a card, it can impact your credit score in case you close the account.
Some people have a habit of removing old accounts or deactivated accounts or accounts, but doing this with result in negative history. Also, many people try to get their old debts removed from their reports after paying them, which is not a good move. Removing old accounts will impact your score a lot as they may have a good repayment history. The debts repaid must be kept in your report as they will improve or fix your credit score and also show your creditworthiness.
Plan your credit: People who have not planned their finances well end up having a falling credit score. If you are applying for too many credit cards with the purpose to increase your credit limit and are not able to pay off them on time, then you will end up having a huge outstanding balance. Also, don’t apply for unplanned loans as it will leave you in a very bad financial state if you are unable to repay them on time. So apply for a loan only if it is very important and when you can repay them.
Consolidate your debts: If you have so many debts, you can take out a debt consolidation loan from your bank or a credit union and use them to pay off. Always remember that if you can a lower interest rate on your loan, you can pay down the debt faster to fix your credit score.
It's important to remember that improving your credit score is a time taking effort. However, consistent positive financial behavior can bring significant improvements in your credit score over time. If you don’t have time to improve your credit score, you can get in touch with credit repair companies like Social Credit Repair for credit score solutions and they will negotiate with your creditors and help you improve your credit score.