A credit score is a 3 digit score that banks and financial institutions use to determine an individual’s creditworthiness. Credit score is computed based on your credit history. Your credit history is a summary of your payments, number of loans or credit cards used by you, etc. There are 4 major credit information companies in India, namely CIBIL, Experian, Equifax, and Highmark. 

Your credit score is very important in getting approval for loans and credit cards. Even if lenders offer you credit with a low credit score, you may not be eligible for higher credit limits or lower rates of interest. Thus, if your credit score is low, take steps to improve it.

Here are some handy tips given by CreditMantri for fixing your poor credit score:

Monitor Your Credit Report Regularly

To improve your credit score, you should check your credit report regularly. In this way, you will come to know about the errors in your report. If you find flaws in your report, you can get it rectified immediately. As the credit score is computed based on the information mentioned in the credit report, you must get it corrected immediately. It is very important to ensure that the credit report is free of errors.  

Pay Off The High Debt Amount 

Strive to keep your credit utilization ratio (CUR) below 30%. The credit utilization ratio is the ratio of credit card balances to credit limits. A credit utilization ratio of 10% is highly recommended. So, pay off the higher debt amounts first. Having a high balance on your credit card impacts your credit score greatly.  

Avoid Making Late Payments 

Make sure that you repay your loans and credit card bills on time. If you feel that you will miss out on them, then set alerts related to loan and credit card repayments. Also, it is good to pay the bill before the due date arrives. The credit bureau monitors the pattern of payments made every month and calculates the credit score based on it. The scores are computed based on the track record of all your loan and credit card payments. You can improve your credit score drastically if you start paying your dues on or before time. 

Clear Outstanding Bills

To calculate your credit score, there are various factors taken into account. One of the most important factors is your repayment history. If you have any outstanding credit card bills or loans, you must repay it off immediately to fix your credit score or increase it. A credit history consisting of defaulted payments will lead to a poor credit score. It is a good option to activate payment alerts or auto-debit facilities as this ensures that you always pay off your credit bills or EMIs on time. Also, try to pay your credit card bills in full and avoid making minimum payment. Making minimum payment will increase your outstanding payment balance, and at one point of time, it will exceed your repaying capacity. 

Do Not Close Old Credit Cards

You may tend to close old credit cards when you have paid them off. However, do not do this and keep them open. Doing so will give you a long credit history, which may make up about 15% of your credit score. But you need to exercise caution here, because the lender might close your credit card if it is inactive and he may also charge an annual fee for that. 

Do Not Take Too Many Loans And Credit Cards

At times, you will need urgent finance for emergencies. Sometimes, to repay a loan, you may take several loans or credit cards. Every time you apply for a loan or credit card, the bank will look into your credit history. Frequently applying for loans signifies that you are hungry for credit and this will lower your credit score. For the same reason, it is not good to apply to multiple lenders and then opt for the one that gives you a loan. 

Choose A Longer Loan Tenure

When you borrow a loan, choose a longer tenure for repayment. This will ensure that your EMIs are low and you can pay them on time. Defaulting or skipping EMIs leads to the lowering of your credit score. On the other hand, paying your EMIs on time will improve your credit score. 

Choose Different Forms of Credit To Build A Credit History

If you have not applied for any loans or credit cards till now, you will not have a credit history. So, your credit score will be low. Build a credit history by taking a good mix of secured, unsecured, long term, and short tenure loans. This may help you get higher loan amounts and lower interest rates in the future.

Conclusion

The points discussed above are some handy tips for fixing your poor credit score. However, your credit score will not improve overnight and will take time to do so. Follow these tips given by CreditMantri. You can do a free credit score check and download your free credit report from us. You can subscribe to our credit improvement services through which we will guide you on what actions you need to take to improve your credit score. 

FAQS Here Are Some Handy Tips For Fixing Your Poor Credit Score

1:What is considered as a good credit score?

The range may vary based on the credit scoring model. However, in general, credit scores between 580 to 669 are considered fair. Those between 670 to 739 are considered good, and between 740 to 799 are considered very good. If your credit score is above 800, then it is excellent. 

2:What is the quickest way to rebuild bad credit?

  • Pay your bills on time 
  • Keep a low credit utilization ratio
  • Be cautious with new credit
  • Get help with debt
  • Consider a secured account.

3:What is a CIBILTM  score?

A  CIBILTM  score is a score as computed by Transunion CIBILTM., one of the four credit rating bureaus in India. The other 3 are Equifax, Experian, and CRIF High Mark. It is a 3 digit number in the range of 300 to 900, and it is based on the information in your credit report.