Whether it is about raising a loan or applying for a fresh credit card, what banks tend to check before they approve your application is the level of your credit score. A high credit score not only helps you secure a loan on convenient terms, but it also enables you to get it at a lower rate of interest.
It is recommended to check your credit score on a timely basis, and if your score falls in the category of not-too-impressive, say, it is below 650 – you need to get your act together and do something about it. Here we share a few useful and actionable tips which can help you improve your score considerably.
Improve your credit score: Here we 5 useful tips
I. Pay your bills on time: First and foremost, you must make sure to clear your bills on time. Regardless of the amount – large or small – you must make sure to keep the outstanding amount to zero post deadline. In some extreme circumstances, you may decide to pay the minimum due – but it is advisable not to do this as a routine.
When you delay bill payment, it makes an adverse impact on your credit score.
II. Keep CUR optimum: Another key factor that influences your credit score is your credit utilisation ratio (CUR). To maintain an excellent credit score, you must keep the CUR under 30 percent. For the unversed, CUR refers to the ratio of credit utilised divided by total credit limit. For instance, when your available credit limit is ₹10 lakh out of which you have used ₹4 lakh – then your CUR will be 40 percent.
Since the optimum CUR is 30 percent, an extra one lakh expenditure is likely to harm your credit score.
III. Keep adequate number of cards: As mentioned above, card users must spend within their range of CUR. Therefore, if your requirement is more than total credit limit, you may decide to take another credit card to increase your credit limit. This means more cards can help you improve your score.
IV. Amount of loan: Another key tip to maintain a good credit score is to borrow only the amount that you require and not more than that. This is because the higher the loan amount, the more difficult it becomes to repay in the long run. It also impacts your ability to borrow in future when you genuinely need the funds.
V. Right credit mix: Another important tip to maintain a good credit score is to have a healthy credit mix. The healthy credit mix includes different categories of loans – secured, unsecured loans, credit card debt, among others.
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