Introduction
If you’re looking for a way to improve your credit score, you’re in luck! We have some great tips for doing just that.
How Credit Bureau Score is Calculated?
Your credit score is a single number that represents your risk to lenders. Your credit score can range from 300-850, with scores below 620 being considered low, and scores above 720 considered excellent. To calculate your score, the credit bureaus consider several factors:
- Payment history (35%) – This tells the lender how reliable you are in paying back your debts on time or at all. If you have no history of paying back debt, then the lender will assume that you will not pay them back either.
- Credit utilization ratio (30%) – This is used to determine how much of their total available credit a consumer has utilized in relation to how much they could potentially use if they wanted to borrow more money. So it’s important not only that you don’t max out any one card but also that you spread out your overall spending across different cards so as not to exceed the limits on any given card too quickly.
- Length of Credit History (15%) – People who’ve had accounts longer tend to be less risky than others.
Factors that can improve your score.
- Pay your bills on time.
- Keep the balances on your credit cards low compared to their limits.
- Keep your total debt, including mortgages, car loans and student loans, below 35% of the limit of all your revolving accounts (credit cards and lines of credit).
Never Miss a Payment
The most important thing you can do to keep your credit score high is to make sure that you always pay your bills on time.
Not making a payment on time can cause your score to drop right away, and it will stay down until the account is brought up-to-date again.
Miss a payment on an account with a higher balance, like a credit card or car loan, and your score will take an even bigger hit.
You can also download apps like Cred which connect directly to your bank accounts or UPI and give you an idea about your card expenses and help track them and also help with payment reminders.
Keep Your Credit Card Utilization Rate Low
The best way to improve your credit score is to keep your credit card utilization rate low. The utilization rate is the amount of debt you use in comparison to the total limit on all of your accounts combined. The less you use and the more money you have available, the better it will be for improving and maintaining a good credit score. A good rule of thumb for keeping this number low is to use less than 30% of your total limit on any given card (if possible).
If you don’t have many cards or loans at all, this might seem like a lot more work than it’s worth—but don’t worry! If that’s the case, start with paying off any high-interest debts first (like lump sum loans) before moving onto other ones with lower interest rates or smaller balances—and always pay off credit cards every month so there isn’t interest building up on them either!
Monitor Your Credit Report
Monitoring your credit report regularly is an important step in the process of improving your credit score. You can get a free copy of your credit report once every 12 months by visiting paisabazaar.com.
You should always check that the information on your report is accurate and up to date. If there are any mistakes, contact the credit bureau in question and correct them immediately so they don’t hurt you in the long run.
Dont Close Unused Credit Card Accounts
Closing unused credit card accounts can actually lower your score. The reason? All those credit inquiries, which are the number of times a creditor has looked at your credit report in the last 12 months. A high number of inquiries looks like you’re overextending yourself to lenders, even if it’s not true. Make sure to keep as many open lines of credit as possible—otherwise, you could be hurting your score without realizing it!
If you have several unused cards with low limits (or none at all), however, it might be worth closing them down if they’re just costing money and taking up space in your wallet or wallet app.
By avoiding the above-mentioned mistakes, you can improve your credit score faster.
Avoiding the mistakes above will help you to improve your credit score faster. If you are not in a position to make these changes immediately, consider ways to reduce the impact of this mistake on your credit report. For example, if you have been unemployed for a while and need to show that you are actively seeking employment, consider working on-line or volunteering in an area related to your career field.
Conclusion
Whether you’re looking to improve your credit score, or simply maintain it, these simple tips will make sure you’re on the right track. With a little bit of patience and some responsible actions, your credit score can be much higher in just a few months! Good luck!