Are you looking to increase your credit score and become eligible for loans and credit facilities at competitive interest rates?
Your credit score is a crucial indicator of your creditworthiness, and a high score means you are more likely to get approved for credit cards and loans. However, simply paying your bills on time is not enough.
In this blog, we'll discuss five common mistakes to avoid if you want to improve your credit score. By avoiding these pitfalls, you can ensure that your credit score is strong and reflects your financial responsibility.
A high credit score indicates that you are creditworthy and more likely to repay your dues on time. So, lenders may approve your applications for credit facilities like loans and credit cards more quickly.
To increase your credit score, it is not merely enough to repay your current EMIs and liabilities on time. Here are 5 such mistakes to avoid to increase your credit score.
A low credit utilisation ratio that is 30% or less is considered a sign of creditworthiness. However, when you max out your credit card, your credit utilisation ratio becomes 100%. This could directly affect your credit score and pull it down significantly. Limit your credit utilisation ratio to 30% to increase your credit score.
Paying only the minimum amount on your credit card avoids late payment fees, but incurs interest and harms your credit score. Paying your full credit card balance each billing cycle can improve your credit score over time.
When you apply for credit, the lender or card issuer will check your credit report with a hard enquiry to determine your eligibility. If you apply for multiple credit facilities at the same time, it can negatively impact your credit score as it makes you appear credit-hungry.
If you no longer use a credit card or any other credit facility, it may seem logical to close the account. However, this reduces the overall credit available to you and consequently increases your credit utilisation ratio. Your credit score could be adversely impacted if the ratio exceeds 30%.
Missing credit card payments can drastically reduce your credit score. To avoid this, make sure to pay your EMIs and credit card bills on time. Consistent on-time payments can help improve your credit score.
Sometimes, an error in your credit report may unnecessarily decrease your credit score. By monitoring your credit score regularly, you can quickly identify any such errors and rectify them on time for a secured future.
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No, spending more will not directly increase your credit score. If you make purchases or payments using your credit card and pay your dues on time, your credit score will improve.
A credit card can help you increase your credit score if you pay your credit card bills within the due date. The exact amount of increase in your credit score varies from one case to the next, typically raising by a few points each time you repay your dues.
You can calculate the increase in your credit score by subtracting your old score from your new score. You can also express this as a percentage.