How to Repair Your Credit Score? Your credit score plays an important role in your loan application process. It is a 3-digit number, ranging from 300-900 that determines your capability to repay the money you borrow. The credit score is calculated based on your credit history, and it includes your loan information from the lender, information about bill payments, and payments of credit card dues and loan EMIs. Any score above 700 is a good credit score when applying for a new line of credit. It’s most likely that you would have realized the status of your credit score when you applied for a loan or a credit card, and the lender stated that your credit report is not healthy! A poor score will prevent you from getting a line of credit or a loan and needs immediate repair! Here are 6 ways you can better your credit score:
Check your score- Check, Assess, Analyze!
The first step to fixing your credit score is to get a copy of your credit report. You can get a free credit report from CRIF every year, to assess your credit situation. Your credit report gives brief information about all your lenders, stating the type of credit and your payments against them. It also shows the status of your credit card or loans, whether ‘closed’ or ‘active’. Cards that are active for a longer duration build a stronger history of repayment than cards/loans that have been closed or settled! Let’s get to this in
the
end!
Related Reads: 5 Frequently Asked Questions About Credit Score!
Check for errors- Stand up and Document!
Go over every small detail on your credit report starting with your personal information, how your name is spelled to whether your KYC details are updated correctly. Then, check whether information about your loans, lenders and payments are accurate. Make sure you fix any errors immediately by disputing them with the credit bureaus such as CRIF, with documented proof of the correct entries that need updating on your credit report.
Check the enquiries- Hold on and Start Repair Measures 101! When you pull out your credit report, a soft enquiry is initiated but when a bank or a lender pulls it out, a hard enquiry is initiated. Soft enquiries don't impact your credit score, but a hard enquiry does! That’s why don't keep applying for credit cards or loans immediately with other lenders if one rejects your application or puts it on hold. The number of times it is pulled takes a
few points of your credit score. Check for payments- Initiate Automated Payments!
Good reports reflect healthy payment habits! If you borrow more than you can repay, you are bound to default on payments of credit card dues or loan EMI’s. Even if in the past you were unable to repay your credit due to financial difficulties and got an extension from your lender for complete repayment, it will reflect on your credit report negatively. Ensure that you make timely payments by setting up the auto debit feature from your savings account every bill cycle, to
avoid missing payments! Check the utilization- Limit How Much You Borrow!
Credit utilization ratio is a crucial determinant for credit score as it calculates how much credit you use against the total credit limit you have. If you want to find out your Credit ratio then add all your credit statement balances for the last year and divide them by 12; you will understand the average credit used every month. Keep your credit utilization ratio between 30% and 40%. It tells your lenders that you use your credit line responsibly while managing your finances towards timely repayments.
Check your credit- Don't End Old Relationships for New Benefits!
As mentioned in the first point, the status of all your credit accounts matters! We usually rush to close loans or credit cards by repaying the entire debt, but that impacts our score negatively. Your credit history is a continuous effort, so manage your credit utilization and repayment effectively. Keep old credit cards active if they don't incur annual maintenance charges to maintain a healthy and a positive credit history! Building a good credit score takes time, so does repairing it. Start by getting your free credit score, analyze it for errors and make timely repayments a habit to build a good credit report for any loan application in the future! Get your free credit report from CRIF today!