Having a good credit score is necessary if you are thinking of applying for a loan anytime soon or in the near future. Lenders require you to have a score of 650 or more to be eligible to apply and avail any loan. But what if your credit score is low and not up to the standard?
Well, there are ways to build up your credit score if it is low. If you are seeking a loan in the near future, here are some of the fastest and the most secure ways of improving your credit score –
• Start paying your bills and liabilities on time
The first step in improving your credit score is timing your payments. Your loan instalments, credit card bills, utility bills, etc. should be paid timely. Any delay and your credit score would suffer. So, if you want to improve your credit score quickly, start paying your bills on time. When talking about bills, besides debt repayments, your utility and phone bills should also be paid on time. Their repayment also affects your credit score. Don’t delay paying them as well.
• Don’t revolve your credit card balance
You can pay the minimum amount due on your credit card’s bill and revolve the remaining balance to the next month. When you revolve your credit you suffer in two ways. You pay a high-interest charge and your credit score also suffers. So, always pay off your credit card bill on time and don’t revolve your credit.
• Reduce your credit utilisation ratio
Credit utilisation ratio is the credit which you have utilised against the limit allowed to you. If the ratio is high your credit score would be low. So try and reduce the ratio. To do so you should reduce your credit spends. The less spending you do on your credit card the less credit you utilise. Also, keep your debts limited so that your credit utilisation ratio is low. You can also increase your credit limit to reduce the ratio.
• Don’t apply for too many loans
Applying for too many loans at once is a quick way to hamper your credit score. Too many loan applications result in too many enquiries. Too many enquiries reduce your credit score. Be careful in loan applications. Apply for one loan at a time so that your score is not adversely affected.
• Don’t close your credit cards
Closing credit cards reduce your credit limit. As the limit is reduced your credit utilisation ratio increases. This is a bad move. An increase in the ratio hampers your credit score. So, don’t close your credit cards unless it is absolutely necessary.
• Don’t apply for new credit cards unnecessarily
Credit cards are unsecured loans. Unsecured loans have a negative impact on your credit score. If you avail multiple credit cards you increase the mix of unsecured loans in your credit mix. As unsecured loans increase your credit mix gets unbalanced and affects your credit score. So, don’t apply for credit cards unnecessarily.
If you follow these tips you can increase and improve your credit score easily and quickly too.