Credit score is one of the first filters that lenders consider when assessing loan and credit card applications. Some lenders even take your credit score into account when setting loan lending rates. A low credit score is seen as a sign of indiscipline in credit behavior, those with a lower credit score are less likely to qualify for loans and credit cards or are charged higher interest rates. high for the loans granted to them. In this article, Radhika Binani, Chief Product Officer, Paisabazaar.com, explains 5 financial tips to help you improve your credit score.
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1- ‘Restrict your credit utilization rate to less than 30%’
Radhika Binani, says: âThe credit utilization rate (CUR) refers to the proportion of the total credit card limit you use. As lenders generally view applicants with a CUR above 30% as greedy for credit, credit bureaus tend to lower your credit score by Therefore, credit card users should always aim to limit their card spending to less than 30% of the overall credit limit. Frequently exceeding the 30% mark may ask their existing card issuers to increase their credit limit. Alternatively, you can opt for an additional credit card. An increased credit limit may reduce the CUR, provided you do not ” Don’t increase your credit card spending after you get a higher credit limit.
2- “Refrain from submitting several credit applications to lenders in a short period of time”
âEvery time you apply for a loan or credit card, the lender assesses your creditworthiness by getting your credit report from the credit bureaus. So, if you submit multiple credit applications, especially in a short period of time, your credit score may suffer a significant drop, âBinani explains. “So instead of directly applying for a loan or credit card from multiple lenders, visit online financial markets to compare the different credit card or loan offers available, based on your credit score, your income and other eligibility criteria and apply for the optimum. Although these markets will also retrieve your credit report, these credit report requests are considered inquiries by the credit bureaus and, therefore, they have no impact on your credit score. â
3- “Ensure regular and timely repayments of loan IMEs and credit card bills”
Binani suggests, âIt is widely accepted that credit agencies place maximum importance on credit repayment history when calculating credit score. Therefore, consumers should always do their best to pay off their loan and credit card before the due date. “
4- ‘Develop the habit of reviewing your credit report periodically’
âAs credit bureaus calculate credit scores primarily on the basis of information provided by lenders and credit card issuers, any incorrect information, clerical error, or even fraudulent credit activity listed on your credit report can have a negative impact on your credit score. The only way to spot such inaccuracies is to periodically review your credit report, at least once every three months. In the event that you find such inaccuracies, report them as soon as possible to the appropriate credit bureau and the lender / credit card issuer for rectification. A corrected credit report will automatically have a higher credit score, âBinani adds. âYou can get a free credit report each year from each of the four credit bureaus. You can also visit online financial markets to retrieve free credit reports as well as monthly updates. “
5- “Monitor the repayment activities of co-signed / guaranteed loan accounts”
âCo-signing or becoming a guarantor of a loan also makes you responsible for ensuring its repayment on time. Therefore, any delay in repaying the co-signed or secured loan account will also have a negative impact on your credit score. Thus, be sure to regularly review the repayment activities of the loan co-signed or guaranteed by you. Since the repayment activity of secured or co-signed loans would also be reflected in your credit report, reviewing your credit report at regular intervals can help track secured or co-signed loans. ready, âBinani concludes.
(Disclaimer: The opinions / suggestions / advice expressed here in this article are solely by investment experts. Zee Business suggests that its readers consult their investment advisers before making a financial decision.)