The best feeling in the world is buying your very own house or car, right? So, have you ever thought of
owning something which is expensive? If your answer is yes, then you might have also given a thought
of availing a loan to meet your financial needs. But, before you apply for a loan you should be aware
about your credit history that defines your primary eligibility to get a loan. And, for this reason, it is
extremely vital to understand the concept of credit score, and how you can improve it with time.
Credit Score: It is a three digit number, which is based on an analysis of your past credit files. In simpler
terms, basically, it is a reflection of your credit-worthiness. The score is a parameter which determines
how likely you will be able to repay your full debt. The mathematical expression is basically based on
credit information, which is generally supplied by an authority known as “CIBIL”. Usually, a credit score
of 750+ is considered to be good. Although you might be able to avail a loan even if you fall slightly short
of the 800 or 750+ mark, a higher credit score gets you exactly what financial product you might need
the most. Well, according to the RBI guidelines, every financial institution considers your credit score
before approving or rejecting a loan application. Here are some ways on how you can improve your
Clear All Your Dues on Time: Bad debts may provide you a minimum score to apply for a loan, and you
can still fix it in time. The rule to this game is that there are no quick repair solutions as the whole idea is
to gradually build the positive score first by clearing all your previous dues. It will help you to over-rule
your past negative record. That’s why most of the financial pundits suggest clearing all your dues on
regular basis, because if you skip your EMIs and make late credit card payments, it decreases your credit
score. Thus, your immediate step is to clear all your old dues as soon as possible.
Secured and Unsecured Loans: If you have a number of unsecured loans running, lenders might reject
your loan application. That’s why financial experts advise to keep all your unsecured loans under check.
On the other hand, if you repay your secured loans on time, it creates a positive impact on your credit
Credit Limit: If you use more than 50% of your credit limit, then it can adversely impact on your credit
score and it also signifies that you may have some issues in the repayment of the debt. In order to
maintain a high credit score, you should try to limit your credit limit at 30%. And, instead of a credit
card, try to use a debit card to pay for some of your expenses.
Monitor Your Credit Score: In order to improve credit score, firstly, one should learn to monitor it on a
periodic basis. Through your credit report, you would be able to analyze all the details of your negative
accounts and then accordingly one can take appropriate actions to resolve it. Along with this, you should
maintain a discipline towards credit for at least 6 months.
These were some of the ways through which you can improve your credit score slowly and steadily. So,
if you are stuck with your low credit score, all you can do is start mending your credit report. The trick is
to gradually build the score so that your recent track record and discipline towards repayment negate
the impact of your previous financial mistakes. Hope this has been helpful, good luck and all the best!