Good Credit Score is a mandatory requirement for anyone looking to avail any kind of credit. A credit score is a numerical representation of your creditworthiness which is shown in the range of 300-900, with higher numbers representing higher levels of creditworthiness.
As you probably already know, there is no quick-fix solution for increasing your credit score overnight. Just like treating a sugar problem takes months of medication or building fitness takes months of strict diet and workout plans, improving your score takes the same amount of discipline and consistency.
Having said that, there are a few things that you can do right away that will result in a noticeable improvement in your score.
Understand What Comprises A Credit Score
Before starting off, it is good for you to know what comprises a credit score. A credit score is a combination of many other underlying factors. The factors affecting a credit score are
1. Payment history – On-time and consistent repayment leads to a higher score
2. Credit Utilization Ratio– Having low credit usage on your credit card provides a much-needed boost
3. Credit history – The longer the credit history, the higher the credit score
4. Credit mix- Having a mix of secured and unsecured credit is a proof to the lender that you are able to handle the credit efficiently
5. Hard inquiry – Taking out credit within short time negatively affects your credit score as there are too many hard inquiries involved
Get Your Credit Score or a Credit Report
To start with, check your credit score here. With a credit score, you also get to know how you are performing on all these parameters that decide your credit score. With the free credit score, you can get a brief insight into how well you are faring in each of these parameters.
If you are not sure of how to interpret the scores and its underlying features, you can also apply for a detailed Credit Report on our site. With the credit report, you would also get an analysis of how you are performing on each of the factors and the reasons why your credit score is down.
In addition, you would also get a detailed plan of action which will help you improve your credit score at the earliest.
Check For Errors in Your Credit Report, If Any
As you know, all lenders from whom you borrow, report all your actions, i.e. payments, defaults, loan or credit card closures, etc. to the credit bureaus, who then calculate your credit score based on these elements. It is possible that errors creep into the reports due to oversight or mismatch in PAN numbers/names, etc.
With erroneous reports, your credit score can easily get affected. For Ex: You might have closed a loan by paying all outstanding but the same was accidentally reported as Settled instead of Closed. Settling a loan conveys that you were unable to pay your EMIs over a long time and the loan was settled by taking a portion of the loan owed as a full and final settlement. Getting such remarks is definitely a big blotch on your credit score.
So, if you notice any errors, it is good to bring it to the notice of the credit bureaus and getting the error rectified at the earliest with supporting documents. Once the error gets rectified, then the bureau will do a rework of your credit score which should see a jump in your credit score.
Make Sure Your Future EMI and Outstanding Payments Are In Full
Resolve to make all your payments in time and in full. This is the best way to quickly improve your score. When you have a consistent record of making timely payments, you are viewed as being financially responsible and your score will rise. Conversely, the more you delay your payments (credit card bills, EMIs), the more your score drops.
So, if you are one of those who miss their payments due to oversight, it might do you good to go in for an auto-debit facility for your EMI payments. It might also be good to pay your EMI/Credit card outstanding bills the first thing after you get your salary lest you get tempted to spend your salary on other discretionary expenses like shopping, travel, food, etc.
Rein In Your Credit Card Expenses
Credit utilization is a factor that goes on to contribute to your credit score in a big way. If you are one among those who max out your credit card each month, then it is a warning sign for you.
Additional Reading: Watch out for these signs of credit and debt problems that you should be aware of
Starting from today, try and spend less than 30% of the credit limit on each of your credit cards. It might be difficult to cut down on purchases and change your spending pattern, but having a low utilization rate is a good way of improving your score quickly. You need to exercise the same self-discipline as a diabetic who has to give up eating sweets. And we are sure you will see your credit score climbing up at the earliest.
Try Increasing Your Credit Limit
As you know, credit utilization ratio is an important determinant of your credit score. While one way of having a better credit utilization ratio is by spending less on your card, the other way is increasing your credit limit.
For ex: You have a credit card which was issued quite some time back when your income was quite low, thereby has an extremely low credit limit. Even though you have not been spending much due to the low credit limit, your credit utilization ratio is high.
In cases like these, you can approach your credit card issuer for an increase in credit limit. With an increased credit limit, your credit utilization comes down. But you should be careful not to increase your spending as your credit limit increases. If you increase your spending with the increase in your credit limit, then you are sure to bring your credit score further.
These are some of the things that you could do to bring in a speedy improvement in your credit score. However, there are some things that you should be wary of. Do not fall prey to unscrupulous agents who promise an instant increase in credit score. You should employ the services of only professionals/experts who have proven track record in credit score improvement.
To avoid being in situations where you have to struggle to improve your credit score, keep a check on your credit score and always remain responsible on your credit.