A credit score is a numbered rating that credit rating agencies offer you, based on the knowledge they hold on your credit report. Knowing the way to build your credit score is vital if you would like to enhance your possibilities of getting approved for credit.

Credit bureaus produce, keep and update our credit report. They give this data to prospective lenders upon request, to assist them to verify your identity or confirm your creditworthiness. 

Sometimes you may be surprised to find that your credit scores are low. This comes as a huge blow, especially when you’re relying on your credit scores to qualify for a loan or credit card. Typically it takes weeks or months to see an improvement. 

In this guide, we walk you through the common things that can help you improve or lower your credit score. Understanding these factors will give you a clear picture of your credit score, helping you work on improving it. 

Common Things that Improve your Credit Score

1. Always check for any errors in your credit report

Before applying for any type of credit, take the time to look carefully through your credit reports for any mistakes or fraudulent activity. If you notice any mistakes, like an incorrect address, ask the credit bureau to update your credit file.

2. Always Pay Credit Bills on Time

It’s necessary to repay your credit card bills on time, every time. That includes loans, credit cards, and mortgage repayments. Paying your bills on time and fully will have a positive impact on your credit score. 

With credit card debt, paying the minimum amount every month is better than missing a payment. However, doing it repeatedly can negatively impact your credit score because it suggests you’re spending more than you earn. So, try to settle your credit card bills in full every month, before the due date. 

3. Don’t Be Scared of Credit

While it's going to sound strange, having no credit means that it’s hard to prove that you just will effectively meet your repayments. A lender has no proof that you’re accountable with your cash and can make your repayments. 

To build your credit score, you can opt for a credit builder loan or a secured credit card. By paying these credit bills on time and in full, you demonstrate your ability to handle credit effectively. This helps in building your credit score. 

4. Do not apply for an Excessive Amount of New Credit

Each time you apply for credit, it leaves a hard inquiry on your credit report. Once credit providers check your credit file, they're going to see these multiple hard inquiries. You can negatively impact your credit score if you have got too many hard inquiries over a brief amount of your time. 

Remember that one or two hard inquiries won't impact your credit score too much. In general, the stronger your credit history and credit scores, the less you will have to stress regarding the impact of one hard pull. 

5. Avoid Defaulting on your Credit Card Bills or Loan EMIs

If you’ve failed to make payments on an account with a bank, mobile phone, or utility company, typically over a 3-6 month period, the lender can shut your account. This can be called a default. Defaults are recorded on your credit report and reduce your credit score, making it much harder for you to get credit in the future.

Common Things that Lower your Credit Score 

1. Applying for several credit cards or loans at the same time

The only way to have a strong credit score in the first place is to borrow money and pay it back on time. However, be cautious about applying for too many credit cards and loans at the same time. 

A lender does a hard credit pull of your credit report before extending you a line of credit or any loan. Hard inquiries cause a little dip in your credit score. 

2. Paying your loan bills too late

Lenders may forgive a late payment (30+ days overdue) here or there, however consecutive late payments will certainly hurt your score. And a late payment that exceeds ninety days can have the biggest impact on your score. Plus, it’ll remain your record for seven years.

Keep in mind that this is applicable for late credit card payments and all loans including student loans, home loans, personal loans, car loans, etc. Delinquent payments have one of the biggest negative impacts on your credit score. 

3. Defaulting on a Loan

The distinction between delinquency and default is generally a matter of time. Delinquency is once a borrower fails to repay their bill for a period of 30-90 days. Delinquencies can lower your credit score, however, they can be cleared up by merely paying the owed dues, and whatever fees have been incurred.

A loan is considered a default once a borrower systematically fails to pay their bills for longer than 90 - 120 days. Depending on the lender and also the kind of loan, the length of your time at which a loan has defaulted will differ. Usually, though, it’ll be at some period of over ninety days.

As you'll guess, defaults are much tougher to rectify than delinquencies, and also the consequences are more serious. If the defaulted loan is collateralized, as an example, then the lender will seize the borrower’s assets to catch up on that missing debt. Your credit score takes a heavy hit if you default your loan. It’ll stay on your record for seven years, too, which might stop you from securing loans in the future.

4. Using your credit card too much

Your credit utilization ratio is way more vital to your credit score than the payment limit you've got on that card. In reality, the credit bureaus don’t care about how much cash you've got to spend—they care about however well or poorly you manage the money.

As a thumb rule, your credit card balance shouldn’t exceed one-third of your credit limit. if it is more than that, then your creditor would possibly assume you’re excessively dependent on your credit card. Maxing out your credit card could be a red flag. It indicates to the lender that your ability to repay your debt may not be able to keep up with your payment habits.

Additional Reading: How to improve your credit score?


It’s important to know where you stand so that you will know how to monitor your score. You can get a free credit score check on the CreditMantri website. Stick to using the same credit score calculator every time you check your credit scores. If you check from different sources every time then it is like trying to monitor your weight on different scales or possibly switching between pounds and kilograms. So, check your score regularly and make a plan to monitor your credit. 

For best results, practice healthy credit habits such as using credit only when required, making payments on time, applying for credit only when needed, and thinking twice before closing an account. 

Remember that just like your body weight, credit scores also fluctuate. A score is a snapshot, and that number can vary each time you check it. Always remember “Credit healthy tho credit wealthy”.