How To Increase Credit Score In 2024 : 7 Easy Tips
12 Jul 2024 8 mins Credit Cards
Best Tips to Improve your Credit Score within months. Read how to boost your CIBIL score and increase your credit limit in few weeks.
Why is Your Credit Score Important
Your credit score is a critical factor in your financial health. It affects your ability to get loans, credit cards, and even impacts interest rates. A higher score means better options from banks and lower costs of interest.
Your credit score is a crucial factor in your financial life for several reasons:
1. Loan Approval
Lenders use your credit score to determine your creditworthiness. A high credit score indicates that you're a low-risk borrower, making it easier for you to get approved for loans, mortgages, and credit cards.
2. Interest Rates
Your credit score affects the interest rates you're offered on loans and credit cards. A higher credit score can qualify you for lower interest rates, saving you a significant amount of money over time.
3. Credit Limits
Lenders are more likely to offer higher credit limits to individuals with higher credit scores. This can give you greater financial flexibility and the ability to manage larger expenses more easily.
7 Important Ways to Improve Your CIBIL Score
Improving your CIBIL score can open doors to better financial products. Here are some essential tips:
1.Make On-Time Payments
Your credit score is impacted negatively if you miss out on making your loan EMI payments by the due date. Always making payments on time can go the furthest to helping you improve credit.
2.Clear All Credit Cards Dues on Time
Strategically plan to clear your credit card balances by the due date. If you miss the due date, it is reflected in your credit report under the Days Past Due (DPD) section in your CIBIL report.
3.Check for Errors in Your CIBIL Report
Mistakes in your credit report can drag down your score. Check your credit score free online and report any errors to the credit bureau. Resolve these errors by raising a grievance with CIBIL online.
4.Avoid Multiple Credit Applications in Short Duration
Multiple hard enquiries in a short span of time show your hunger for credit. Lenders might consider such applicants to be in financial difficulties and thus have relatively higher risks of credit default.
5.Avail Secured Credit Card
In cases where you need to rebuild your credit score, a secured credit card can be helpful. Once issued, use it diligently and clear dues on time to start rebuilding your credit score.
6.Refrain from Closing Old Credit Card Accounts
Keeping old accounts open helps maintain your score. Banks trust those applicants more who have a longer age of credit history and have paid off their dues on time.
7.Monitor Your Co-signed, Guaranteed, or Joint Loan Accounts Regularly
In case of non-payment of EMIs on time, the credit score of the co-signer/guarantor also takes a hit. Regularly monitor if the repayment of the loan EMIs is done on time.
How to Improve Your Credit Score Fast
1.Increase Your Credit Limit
Requesting a credit limit increase can lower your credit utilization ratio, thus improving your score. Always keep your credit utilization ratio to 30% or less to increase your credit score fast. If you have a credit card with 30,000 Rs. spending limit, make sure you don't spend more than 10,000 Rs. from the credit card.
2.Pay Down Existing Debt
Paying off debt reduces your credit utilization and shows lenders you can manage your finances responsibly. Paying down existing debt is a critical step toward achieving financial freedom and stability. Debt can be a significant burden, impacting your ability to save, invest, and enjoy life.
3.Become an Authorized User
Becoming an authorized user on someone else's credit card account can be a strategic move to build or improve your credit score. It’s a process where the primary cardholder adds you to their account, granting you access to their credit line.
How to Increase Credit Score by 100 Points in 30 Days
1.Dispute Inaccurate Information
Disputing inaccurate information on your credit report is a crucial step in improving your credit score. Begin by obtaining a copy of your credit report from each of the three major credit bureaus: Experian, TransUnion, and Equifax. Common mistakes include incorrect personal information, accounts that don’t belong to you, incorrect account statuses, and outdated information.
2.Pay Off Collections and Past-Due Accounts
Paying off collections and past-due accounts is a crucial step in improving your credit score. These negative marks can significantly impact your creditworthiness, so addressing them promptly can lead to noticeable improvements .Clearing past dues can give your score a noticeable boost.
3.Optimize Your Credit Utilization
Optimizing your credit utilization is a powerful way to improve your credit score. Credit utilization refers to the ratio of your credit card balances to your credit limits. Lowering this ratio can significantly boost your score, as it demonstrates responsible credit management.
Additional Tips to Improve Your Credit Score
1.Choose a Longer Repayment Tenure
Choosing a longer repayment tenure for loans or credit obligations can be a strategic move to manage your finances more effectively and improve your credit score. A longer repayment period can reduce your monthly payment amount, making it easier to meet your financial obligations consistently and on time.
2.Try to Maintain a Healthy Credit Mix
Maintaining a healthy credit mix is essential for a robust credit profile. A diverse credit portfolio can enhance your credit score and reflect positively on your creditworthiness.
3.Dispute Inaccurate Information on Your Credit Report
Your credit report plays a crucial role in your financial life, affecting everything from loan approvals to interest rates. Therefore, it's vital to ensure that the information on your credit report is accurate.
How to Improve or Rebuild Your CIBIL Score for Loan Approval
1.Use a Secured Credit Card
Secured credit cards are an excellent tool for building or rebuilding your credit. They work similarly to regular credit cards but require a cash deposit as collateral. This deposit acts as your credit limit and provides security for the issuer, making it a low-risk option for those with poor or no credit history.
2.Diversify Your Credit Mix
Diversifying your credit mix is an important aspect of maintaining a healthy credit score. Credit mix refers to the different types of credit accounts you have, including credit cards, mortgages, auto loans, and personal loans. A varied credit portfolio can demonstrate to lenders that you are capable of managing multiple types of credit responsibly.
3.Keep Old Accounts Open
Keeping the account open can help you keep building your credit up to where you want it to be so you have an easier time being approved for loans or new credit in the future.
FAQs
Q. What is a Good Credit Score?
A. A good credit score typically falls between 700 and 750, while a score above 800 is considered excellent.
Q. How Often Should I Check My Credit Score?
A. It's advisable to check your credit score at least once a month to stay on top of any changes or inaccuracies.
Q. Can I Raise My Credit Score 100 Points Overnight?
A. While it's unlikely to raise your score by 100 points overnight, taking the right steps can improve it significantly over a short period.
Q. How Long Does It Take to Rebuild a Credit Score?
A. Rebuilding a credit score can take several months to a year, depending on the severity of the damage and the steps you take to improve it.
Q. Can my score improve if I close my credit cards with high balances?
A. Closing cards can reduce your available credit, which may negatively affect your credit utilization ratio. It’s better to pay down the balances.
Q. Is there a difference between a CIBIL score and a FICO score?
A. Yes, CIBIL is specific to India, while FICO is used internationally. Both measure creditworthiness but may have different scoring models.
Q. How does a personal loan affect my CIBIL score?
A. Timely repayment of a personal loan can boost your score, while missed payments can hurt it.
Q. Can I get a home loan with a low CIBIL score?
A. It’s possible but may come with higher interest rates. Improving your score can help you get better terms.
Q. What should I do if I find an error on my CIBIL report?
A. Dispute the error with CIBIL immediately by providing the necessary documentation to support your claim.
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Author- Ayush Naik
Ayush Naik is an expert in personal finance with an MBA in Finance. With over five years of experience working alongside stock market traders, Ayush has a deep understanding of market dynamics and investment strategies. His practical insights and analytical skills have helped many individuals navigate the complexities of financial planning and investment. Ayush’s professional background and commitment to educating others make him a valuable contributor to our personal finance blog.