Many people in India struggle with a poor credit score and a lack of awareness contributes to the inability to improve it. People who have not used credit before must understand that credit score is the backbone of their financial wellbeing. You may often come across the term CIBIL™ score but are you aware of its meaning and significance? Credit Quickly
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A bad credit score can result in financial loss for an individual or borrower. People who have good credit score should be cautious about periodically checking their credit reports. This is because, at times due to misinformation furnished to credit bureaus, an individual’s credit score may drop drastically. If you have experienced this, here are some smart tips that you can use to build your credit such that you do not face any difficulty while availing of loans or credit cards in the future.
Avoid late payments
If you took any type of loan or credit card, make sure that the repayment is never delayed. This is because it can directly impact your credit score negatively. You can try to avoid late payments by aligning monthly payments through auto-pay mode, reminders or noting down the monthly task sheet.
Regularly review your credit report
One of the most essential factors which influence your credit is the credit report. You should try to check your credit report regularly for inaccuracies or incorrect information. In case there is any discrepancy in personal information or the information has not been updated, you can raise a dispute with the credit bureau to resolve the same. This can help in improving your credit score fast.
Limit your credit utilization
If you use a credit card, you should try to maintain your credit utilization ratio under 30% of the total available monthly credit limit. This can be achieved by distributing the expense burden across multiple credit products. By restricting your credit utilization ratio, you can build and maintain your credit which can eventually benefit you by allowing easier access to finance in the future.
Manage a good credit mix
Unsecured loans such as personal loans, education loans, etc. Are often considered to be the primary reason for a reduced credit score. Since these loans are available without any collateral, the risk involved is higher as compared to secured loans, such as home loans. To build and improve credit fast, you should always ensure a good mix of credit which can also help in balancing out the risk factor. A healthy mix of credit is also safer for banks as an applicant will not be considered to be a high-risk borrower.
Avoid multiple credit inquiries
Never apply for multiple credits at the same time since it displays that you are credit hungry and lenders often view this as a negative sign. Each time you make a credit enquiry through a loan application, it gets recorded in your credit report. Frequent loan applications send a negative signal to lending institutions and the chances of loan rejection may rise. Therefore, apply for credit in a planned way and only when absolutely needed.
Never exhaust your credit limit
Avoid using the entire available credit limit else. It can result in your credit utilization ratio rising and your credit score decreasing. However, if your expenses are causing a burden on the existing credit line. You can request your bank to increase the credit limit.
Avoid closing old credit accounts
Closing your old credit card accounts is not advisable. It is a reflection of your long-standing association with the bank or credit card institution. It also reflects upon your long repayment history. Closing old credit card accounts can nullify your previous credit record with the bank and can impact your credit score negatively.
Keep a close watch on your co-signed loans
It is important to regularly check on any loan account that you opened as a co-signer. In cases, the borrower may face some financial emergencies and could be unable to repay the loan amount. Due to any missed or delayed repayments, your credit score can be impacted as a co-signer. Therefore, always keep a track of the loan that you have co-signed. Credit Quickly
Use at least one credit product
If you do not have any credit history, you may face difficulty in easily getting loans from banks. Even if your loan is sanctioned, the interest rates offered can be on the higher side when compared to the deals available to people who have a credit history. Thus, availing of at least one form of credit such as a credit card can be a feasible option to maintain credit history and positive credit track record. Credit Quickly
Conclusion
Any credit score above 750 considered good by most banks and lenders. For availing of lending products at lower interest rates, you must make use of the smart tips mentioned above. Ensure to build and improve your credit fast before applying for a loan or credit card. With the help of this simple steps mentioned above, you can see a gradual rise in your credit standing. Credit Quickly
