Credit Score Mastery: Strategies to Improve Your Credit Score

The Reserve Bank of India, the central bank of the country, has authorized four credit information agencies to collect information on credit users and use this information to assign them credit scores. The credit score is a three-digit number ranging from 300 to 900. This number is important as it is reflective of a person's attitude towards credit. A credit score in the range of 750 to 900 is considered excellent. Individuals who have such a credit score are people who have a responsible attitude towards credit. These are people who pose almost zero risk of loan default. Therefore, lenders sanction loans to such individuals at the most beneficial loan terms and conditions, including the lowest interest rates and longest repayment tenor. Credit users are thus advised to maintain a credit user above 750. 

If your credit score is below 750, do not worry. Credit scores are not absolute; they change with time and how you use credit. In this article, we share with our readers some simple strategies to help them improve their credit scores. 

Credit Score Mastery: Strategies to Improve Your Credit Score

1. If you are someone who easily forgets due dates, we recommend you set up payment reminders. You can also authorize your bank to make payments on your behalf. This way, you will save yourself from missed EMI payments and credit card bill due dates, both of which harm one's credit score. Credit users must maintain a clean repayment history as it makes up almost 35% of their credit score. 

2. Many individuals make the mistake of exhausting the entire amount due on their credit cards and then paying only the minimum amount due. When you do that, your credit utilization ratio increases with time and eventually reaches an unhealthy level. The credit utilization ratio is the ratio of credit used to credit available, expressed in percentage. A high credit utilization ratio is the sign of an unreliable borrower, someone who is excessively dependent on credit. Credit users must maintain a credit utilization ratio below 30% if they wish to maintain good credit score. 

3. Individuals who maintain a healthy mix of both secured and unsecured loans have a higher credit score than individuals who have only one type of loan as having a healthy credit mix establishes one's ability to handle all kinds of debt. Credit users must therefore try and have both secured and unsecured loans. To make things clear, secured loans are loans secured by collateral or security. Unsecured loans do not involve any collateral. 

4. The age of an individual's credit history also impacts their credit score. The older one's credit history, the better their credit score. Loan borrowers must therefore never close old loan accounts and credit cards. 

5. Hard enquiries also have a direct impact on a person's credit rating. Hard enquiries refers to the number of enquiries lenders have made regarding a loan applicant or credit user. Too many hard enquiries indicate an excessive need for credit and high reliance on it. Thus, individuals who have too many hard enquiries under their name have a low credit score. Credit users working on improving their credit score must never apply for too many loans or credit cards at the same time. This is important to stop oneself from coming across as credit-hungry. 

These simple tips will help you build a strong credit score within no time. So, use these tips and the information provided in this article to your best advantage.