How to Improve Your Credit Score


If you want to get the best deals on credit, then maintaining a healthy credit score is a must. The higher your credit score, the more likely you will qualify for credit cards and loans at favorable terms. This will help you save money on interest repayment on credit. You should check your credit score periodically to know its status. If your score is less, then you should know the factors negatively affecting it and try to overcome it. Improving credit score requires financial prudence and patience as it may take a few months for your score to show improvements. The following tips can help you to improve your credit score:

Always Pay Your Bills on Time

The most important and one of the easiest ways to improve your credit score is to make timely bill payments. You must repay all your loan EMIs and outstanding bills on time. Sometimes you may miss out on payment within due dates because of ignorance. It is best to set up reminders for timely payments against all bills and loans. You should also check your emails regularly for payment reminders sent by the lender.  Even a single late payment can significantly impact your credit score. Delinquent payments can remain on your credit reports for up to 7 years from the date of missed or late payment reported by the credit bureau. Sticking to a regular repayment schedule and paying your outstanding bills and loan EMIs on time can help to improve your credit score drastically.

Don’t Close Unused Credit Cards

You may have credit cards that you no longer use. It is best not to close the unused credit cards as doing so can impact your credit score. the age of credit history matters a lot. The longer you have been using a credit card, the more weightage it will have to your credit score. You should not close older credit cards as they have a longer credit age. You can lose the positive and longer credit age if you close such credit cards. Closing credit cards reduces your total credit limit and causes your credit utilization ratio to increase. An increased credit utilization ratio will further dent your credit score.

Keep a Reasonable Credit Utilization Ratio

You should use your credit card judiciously. Credit utilization ratio represents the total amount spent vis-à-vis the available credit limit on your card. If your card has a credit limit of $10,000 and you have used $2000 in a month, then your credit utilization ratio is 20%. Ideally, you should keep your credit utilization ratio under 30% as it is preferred by most lenders. If this ratio is higher, then lenders may see you as credit hungry and someone who does not manage credit responsibly. A higher credit utilization ratio will negatively impact your credit score. This will further reduce your chances of getting competitive credit.  If you are likely to cross 30% with your credit utilization in a month, try to prepay part of the balance to adjust the credit utilization ratio.

Limit Credit Applications

You should not keep applying for credit if you don’t need it. There are many new credit cards that offer attractive discounts on signing up. However, if you already have a credit card, then think if you need a new credit card or not. Whenever you apply for a new credit card, there will be a hard inquiry on your credit score and this will dent your credit score. If any hard inquiry was made on your credit score and you are unaware of it, you must contact the lender for checking why it was done.

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