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How to Increase and Improve Your Credit Score

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How to Increase and Improve Your Credit Score

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Wondering how to increase your credit score? By taking a few easy steps, such as opening an account that informs the credit agencies, maintaining modest balances, and making your payments on time, you may improve your credit score. 

But sometimes, it can be confusing to figure out where to start. So let us figure out the many ways to increase your credit score without any hassles.

Why should you improve your credit score?

Before getting to the how, let's first understand the why. You could save a large amount of money over the course of your life with a strong or exceptional credit score. If you improve your credit score, you can open the gates to an array of benefits like lower interest rates on mortgages, car loans, and other forms of finance. Better credit scores are associated with lower-risk borrowers, and more institutions will compete for their business by providing better rates, fees, and benefits. 

On the other hand, those with bad credit are viewed as higher-risk customers, which results in fewer lenders willing to consider them and more companies getting away with charging excessive annual percentage rates (APRs). A bad credit score can also make it difficult for you to rent an apartment, rent a car, or even receive life insurance because it has an impact on your insurance score. A lot is at stake when it comes to your credit score, so be mindful of how you’re handling your expenses.

How to increase credit score?

Here, we’ve chalked out a few pointers you need to know if you are wondering how to improve your credit score:

Review your credit reports

It helps to be aware of potential favourable factors when trying to repair your credit score. Monitoring your credit history can help with that. A record of on-time payments, lower debt balances, a variety of credit card or loan accounts, previous credit accounts, and a few credit inquiries are all factors that raise your credit score. Failing to pay on time or lagging behind in any of these can hurt your credit score.

Never miss due payments

Your payment history is one of the most important factors used to determine your credit scores, and having a long history of on-time transactions will help you increase your credit scores. To do this, it’s always a good practice that you don't miss any credit card or loan payments by over 29 days; payments that are at least 30 days overdue can lower your credit scores. Unless you're cautious not to overdraw your bank account, setting up automated payments for the minimal amount needed can help you avoid forgetting to make a payment. Contact your credit card company straight away to attempt and discuss hardship alternatives if you're having problems paying a debt. It can also be crucial to keep track of accounts that do not frequently show up on the credit reports (such as subscription services and gym memberships). 

Consolidate your due payments

It can be advantageous for you to obtain a loan for debt consolidation from either a credit union or bank and use it to pay off all of your outstanding bills if you have many of them. Since you will only have one responsibility to worry about, if you can get a loan with a low-interest rate, you would be capable of repaying your debt more quickly. This could raise your credit score and lower your credit use percentage. Using a debt transfer credit card to pay off several credit card bills at once is a similar strategy.

Take care of the revolving balances

Even when you are not behind on your payments, having a sizable balance on revolving credit cards may cause a high credit usage rate and reduce your ratings. If you keep the balance on revolving accounts like lines of credit or credit cards below the credit limits, you can improve your credit ratings. Most individuals with excellent credit keep their credit usage ratio below 10%.

Limit how frequently you apply for new accounts

Even while you may be required to open a new account to establish your credit history, you should normally try to cut back on the number of times you apply for credit. Every application may result in a hard inquiry that might slightly lower your scores, but inquiries can accumulate and create a compounding effect. The average age of your accounts will also decline if you open a new one, which could lower your scores.

The Bottom Line

As you improve your credit score, your chances of being approved for new loans or credit lines will rise. Additionally, a better credit score could give you access to the lowest interest rates whenever you borrow money. It's critical to understand how your scores are determined and the fundamental techniques to raise them, whether you're establishing your credit from zero or recovering after a setback. 

Frequently Asked Questions

1. How to improve credit scores in India?

To improve your credit score in India, all you need to do is be sincere about on-time repayments, lengthen your credit history by maintaining previous credit cards, customise your limit, and opt for longer tenors while applying for loans. 

2. How long does it take to improve your credit score?

Normally, you can improve your credit score in about 4-12 months. Your credit score is a result of your habits around money like timely payments, stable income, and reduced debt. It's important to be consistent in these when choosing your credit score.

3. How to increase credit score fast?

To improve your credit score fast, ensure the following: 

  • Take care of the revolving credit balances
  • Increase the credit limit 
  • Review the credit reports to find errors

4. How often do I check my credit score?

Regularly checking your credit report for inaccuracies is a good idea, but to avoid harming your score, make sure to only do light inquiries. Check with your bank to see if you can sign up for their service so you may receive alerts whenever your credit score changes; many banks offer credit monitoring to all customers.

5. Does getting a new credit card hurt your credit score?

Yes, getting a new credit card has a negative impact on your credit score but this lasts only a few months. It's likely that you'll go through a thorough investigation before you get your second credit card as well.

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