A credit score is very important for borrowers because lenders use it to decide on loan approval. If your credit score is low, you can take strong steps to improve it. A better score helps you qualify for loans with easier terms, such as lower interest rates and quicker approval.
Improving your credit score takes time, so it’s best to start early. Beginning now can help you see better results by the end of the year.
Credit score: Steps to take to improve it
- Lower Credit Utilisation:
It’s best to reduce your credit usage and keep it below 30%. For example, if your total credit limit is ₹20 lakh, try to use less than ₹6 lakh. To maintain this healthy ratio, you can use more than one credit card. This helps avoid using too much credit on a single card. - Rectifying the Mistakes:
First, check your credit report carefully and fix any errors you find. For example, sometimes a payment may still be shown as ‘pending’ even though it was already made. Getting such mistakes corrected can help improve your credit score over time. - Healthy Credit Mix:
A good way to boost your credit score is by having a balanced credit mix. This means using different types of credit, like a credit card, personal loan, and car loan. Of course, don’t take a loan or card if you don’t need it. But having a credit card can help, as it doesn’t create a liability unless you spend from it—making it a safe way to build credit history. - Clearing Your Dues:
It’s important to pay your dues on time. Even one missed payment can badly affect your credit score, so make sure all bills and EMIs are paid promptly. - Old Credit Cards:
It’s better not to close old credit cards. The age of your credit history helps improve your credit score and shows long-term credit behaviour.
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