A credit score is considered as one of the important measures, which is used by the issuer/lender to understand your financial creditworthiness or health. Higher your credit score, higher your credit score, the higher is your chances of a credit application being approved. Also, a higher credit score makes it simple for you to avail of low-interest rates and charges when availing of a loan.
Thus, if you are one of those contemplating getting an idea about how to enhance your credit score and how credit score calculation is done. Also, a frequently asked question is how to find my CIBIL score
. Here, we will explain all about credit score and how to ameliorate your credit score.
What is called a strong credit score?
A credit score is usually 750 and above and is looked at as strong by issuers/lenders based on which they assess the applicant’s credit application. Apart from boosting your credit approval chances, a high credit score also permits you to fetch lower interest rates on loans, avail reduction or waiver on the processing charges of loan and avail preapproved credit approvals. Moreover, few employment sectors also have steadily begun the trend of considering the credit score for job applicant evaluation. Thus, becuase of the above mentioned reasons, it is important to understand is the best medium to ameliorate your credit score.
What is one of the best mediums to improve your score?
A credit score is one of the first filters factored in by lenders or issuers when evaluating your loan and credit card application. Also, some of the lenders extend their risk-based pricing approach based on the applicant’s credit score. All of it makes it crucial for you to understand the prudent way to ameliorate your credit score.
Here are the top five ways to ameliorate my CIBIL score:
No. 1: Full and timely repayment of credit card dues and loan EMI
Lenders usually prefer lending if you undertake a responsible approach for repaying your dues. Also, the bureaus are believed to endow maximum weightage to credit repayment history during credit score calculation. Thus, it is crucial to timely and thoroughly repay your outstanding dues. Note that any type of credit card or loan repayment irregularity is mentioned on your credit report, which affects your credit score negatively. A low credit score of less than 750 can also affect your future loan and credit card eligibility prospects.
No. 2: Keeping your CUR within 30 percent
CUR is a percentage of your overall credit card limit utilized by the holder of a credit card. As lenders generally consider the CUR of above 30 per cent as an indication of credit hungry behaviour, credit bureaus also reduce your credit score of these individuals by a few points if you breach your CUR level of 30 percent.
If you frequently breach this limit, then you must either choose another credit card or apply with an existing credit card issuer for credit limit increment. Doing this can help you enhance your credit card limit and lower your CUR based on the condition that enhancement of spends must be avoided through credit cards.
No. 3: Regular credit report review
Credit bureaus conduct credit score calculations basically on the information provided by the lenders and issuers. Any incorrect data in the credit report can dangerously harm your credit score. Such inaccuracies might be due to clerical errors on the part of the credit bureau or lender’s part. Illegal credit card transactions are also possible if you timely review your credit report once every 3 months. Remember that the credit report can be availed through online financial markets or credit bureaus.
No. 4: Avoid submitting various credit inquiries within a short timespan
Every time you apply for credit directly through the issuer or lender’s site, they assess your creditworthiness by availing or fetching your credit report from the bureau. Remember that such lender linked requests for reports are known as hard inquiries, which are mentioned in your report and are liable for pulling your credit score down by a few points. Also, if you submit these inquiries various times, then you might view a drastic drop in your credit score. Instead of applying for credit directly with the issuer or lender within a short time span, approach online financial markets to compare and choose the right lender or issuer according to your financial needs and eligibility.
No. 5: Monitor co-signed or guaranteed accounts
Becoming a co-signer or loan guarantor makes you equally liable to repay the EMIs as any primary credit holder. Any delay or default in clearing the outstanding debt not only affects the primary applicant’s credit score but also negatively affects the co-signer or guarantor’s credit score. It is thus important to timely assess the co-signed or guaranteed accounts repayment activities to prevent your credit score from being negatively impacted due to the primary loan holder’s financial irresponsibility.
What crucial steps should you take to enhance your credit score?
A pivotal way to improve your credit score is to undertake good healthy credit habits. Such healthy credit habits include complete and timely repayment of loan and credit card EMIs, striking a balanced mix between secured & unsecured loans and timely reviewing your credit report to identify any incorrect information and keep a thorough check on your credit behaviour.
Apart from this, if you are without any credit score or are new to credit, you may wonder how to enhance your credit score. These users can form their credit score by availing of a credit card or using the card in a responsible way. Those unable to avail of regular credit cards owing to reasons such as low income, no or low credit score, risky job profile, unserviceable locations and others can form their credit score by using a loan against a fixed deposit, which is a secured credit card. Such credit cards are issued against your FD. As transactions through your secured credit cards are directly addressed to the credit bureau, using your credit card responsibly can assist your users in improving or forming your credit score, which increases your eligibility for regular credit cards and loans.