Dos and Don’ts to Improve Your Credit Score

If you want to take any loan or are planning to take a loan in the future, you firstly need a good credit score. A credit score will determine whether you are going to get a loan or not. So, it is crucial to have a good credit score.

What is a Credit Score?

Your credit score is obtained from your credit history, or in other words, your past credit transactions. It uses your payments history, outstanding loans and credit cards.The CIBIL score is most commonly used to know your credit score in India. This is because your CIBIL scores affect the loan amount, interest rates and eligibility for any loan or credit card you are applying for. This makes it very important to maintain a good CIBIL score. Here are some tips to make your CIBIL score better:

What To Do to Maintain Good Credit Score?

Here are 3 things you should do to maintain a good credit score:

Timely Payment of EMI

It is very important to pay all your dues on time. If you miss any of your EMI, it will affect your credit score negatively. Therefore, it is a good idea to opt for the auto-debit option. This way, you don’t have to worry about the due dates as the amount is debited from your account automatically every month.

Having a Presence

Many people, especially in our country, are scared to take a loan or a credit card. This, however, hampers your credit score as you don’t even have one. Thus, it becomes difficult for you to get a loan in times of need. You don’t necessarily need to take a loan to make your presence. You can simply take a credit card and utilise it minimally with timely payment to create your credit score.

Credit Score Check

Always keep a check on your credit score by checking your CIBIL score. There are many ways to check it. You can check it online also. Ensure to identify any incorrect details about your information or transactions as they may adversely affect your CIBIL score.

What Not to Do?

Here are certain things you need to be careful about:

Don’t Borrow More Than What You Can Afford

One of the most common mistakes we make with a credit card and debts is that we borrow a lot. People take more credit cards to repay the older ones, which could have serious repercussions. Your debt will rise, and you will find yourself with a poor credit score and high rates to pay off your debts.

Don’t Max Your Credit Utilisation Limit

When you check credit score online, you can also check how much credit you are eligible for. Try not to utilise the maximum limit, as it will negatively impact your credit score. Try to keep your credit utilisation limit at 30%.

Don’t Remove Old Accounts

If you have closed previous debts or credit card accounts, don’t remove them from the report. If you have a good repayment schedule, they can show your creditworthiness and help increase your credit score.

To Sum Up

The common misconception of credit cards and loans is that they are bad for your finances. However, this is not the case. It is good to have a small percentage of credit that you can keep within your control. This helps you create a credit score and mark your presence in the financial system. With more financial transactions, you will have more opportunities for better creditworthiness.

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