It is not new news when we say that a good credit score can get you the best offers on personal loans and win you the best credit cards there are. But how do we get a good credit score? This is the question many of us find ourselves asking. So here are 10 sure shot methods and tips to improving your credit score-
Your credit card bill clearly specifies the due date of the bill. Adhere to that date. Pay your credit card dues on or before the due date. This will not only be a good thing for your credit score, but also help you in saving on late fees or other charges. If you pay your dues on time, you come across as a responsible borrower in front of your lenders.
Paying your bills on time is not the only important thing. You need to ensure that you pay your entire bill at the end of the billing cycle. You might have heard that keeping a balance on your credit card is a good thing. But it is actually a myth. If there is any balance on your credit card, it will incur interest. By paying the entire amount on time, you can skip the interest.
When you get a credit card, there is a limit that you are entitled to. But this limit is not an indicator of how much amount you should use every month. Credit utilization ratio is the ratio of the actual amount you borrow on the credit card to the entire credit limit that is offered to you. The ideal credit utilization ratio is between 30%-40% .
Lenders take a lot of things into account when they check the credit worthiness of a person. Your debt to income ratio is one those things. It is essential that you maintain the amount of debt you have over your monthly income. This ratio should not exceed 40% at any time.
Length of payment history also has an important role to play in determining a person’s credit score. Hence it is advisable to keep older accounts active. Even if you have a few defaults on your old accounts, you should not close them. This is because defaults stop impacting your credit score after a year and is removed from the report after two years. Newer accounts do not get you a high credit score since there is not enough length to observe a pattern.
If you have a credit card but do not use it often, it is of little use. Utilise the benefits on your credit card by using it frequently. Collect cashback/reward points offered on the card and encash them for your benefit. This will also help you build a credit record. Please note that debit card transactions are not included in your credit score.
Bank officials will rectify your details on the credit report and the transaction details. In case of a mismatch, you will be awarded negative points. Ensure that you dispute any errors on your credit report as and when you notice them. An essential step in this direction would be to check your credit report frequently to keep a track of errors.
When you check your credit report, it is known as a soft inquiry. This has no impact on your credit score. But if you apply for credit at a financial institution and they run a credit score check, it is known as a hard inquiry. This can impact your credit score negatively. Hence, you need to ensure that you do not apply to too many places at any point in time or else your credit score can be adversely affected.
One thing that we can not foresee is identity theft. Cyber criminals have devised various ways to trick customers and acquire their personal information. They then use this information to impersonate them and gain access to their credit cards. The expenses they make can affect your credit score in a negative fashion. To keep a track, you need to keep a track of your financial records at all times. As soon as you notice a discrepancy, notify the bank and protect your credit.
Banks also notice the type of credit you have borrowed in the past. The capability of a person to juggle and maintain efficiently, different types of credit is seen as a positive thing. Ensure you have different types of credit in your credit history to improve your credit score.