How do I improve my credit rating?
It is possible to improve your credit rating or credit rating within a few months, depending on the state of your credit health. Even if you have a poor credit score, it is possible to turn it around either on your own or, if you do not have the time, with professional help and guidance.
What is the meaning of a credit rating?
Your credit rating or credit score is a three digit number between 300-900 that is a snapshot of your credit health. This rating is issued by three credit bureaus that operate in India – CIBIL™, Equifax, Experian and CRIF High Mark. It is based on details of your credit behaviour over a period of years. The credit bureaus have details of every credit–related transaction you have entered into over a period of 7-10 years. The higher your credit rating (i.e., the better your credit history), the higher your chance of being approved for a loan.
A credit score of 750 or above is generally considered as a good score. You can automatically qualify for a loan with many lenders with this score.
What steps should I take to improve my credit score?
First, you need to get an updated copy of your credit report to find out what your most recent credit score is. You can apply to any one of the 3 credit bureaus to obtain a recent copy of your credit report. Read your report to understand the meaning of your credit rating and to identify any credit issues that you need to work on. Some of these issues could include:
1. Administrative/reporting errors: If you identify any mistaken entries that are dragging down your score for no fault of yours, you need to report it to the credit bureau immediately and file a dispute.
2. Large number of missed or delayed payments: Making all your payments in time and in full will significantly help increase your score.
3. High credit utilization rate: If you use more than 30% of your total credit limit on your credit card, it signals that you are hungry for credit. This will cause your score to drop. If this is the case, you will need to work on reducing your credit utilization.
4. Large number of credit accounts: If you have numerous loans and credit cards accounts, it implies that you have insufficient credit and need to tap multiple sources to fulfill your financial obligations. If this is an issue for you, you will need to optimise the number of credit accounts you have so that your score is not negatively impacted.
CreditMantri can help you obtain a free copy of your credit report and do an expert analysis so you can work in a focused and effective matter to improve your score and become loan-eligible.