Your credit score allows the lender to evaluate your repayment ability, that is whether you'll be able to repay the loan or not. A bad credit score can result in either rejection of your loan application or higher interest rates and both the cases are not good for you. Repairing or improving the credit score can be a little time taking but will allow you to get a loan at a lower interest rate.
There are many tips through which you can improve your credit score, some of them are enlisted below
1. Check your Credit Report First
In order to improve your credit score, you first need to calculate it. A credit report contains your entire credit history and other related data. Get a copy of your credit report and check for inaccuracies or errors. Check that there is no late payment listed incorrectly and the amount paid and borrowed are accurate. Once you do so, you can contact the credit bureau to rectify the errors, if any.
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2. Pay your Bills on Time
The simplest way to keep up a good credit score is by paying bills on time. A good payment track record boosts your credit score. On the contrary, late payments can majorly affect your credit score.
Try to pay your bills on time so that you maintain a good credit score. In order to make payments on time, you can start with creating a list of payments to be done, set reminders on your phone, and also cutting off unnecessary expenses so that you don't run out of cash.
3. Clear off Debt and Keep Low Credit Balance
The credit utilization ratio is another important aspect in the process of credit score calculation. It is calculated by adding all the credit balance, given at a time and dividing the entire amount by your credit card limit. You can positively influence your credit score by maintaining your credit balance low. Personal loan can be used to pay off your credit card debt and hence maintain a low credit balance.
4. Don't Close Unused Credit Card
There is no harm in not closing your unused credit cards unless it starts to cost you something. It is a smart strategy for boosting your credit score. Closing an account may increase your credit utilization ratio and owing the same amount with lesser open accounts may lower your credit score.
5. Don't Go for Many New Credits
For the time when you're trying to improve your credit score, it is advised to avoid applying for new credits since multiple credit inquiries can harm your credit score. Credit inquiry is created on your credit report whenever you apply for a credit card, personal loan, consumer loan, etc. Too many hard inquires can negatively affect your credit score.
Additioan Read : 11 things to know about credit score
6. Fixing Late Payments
Late payments are bad for your credit score and missed payments are even worse. This may result in rejection of your loan application in the future when you need funds. In order to avoid such situations, it is better to get organized and start paying your overdue bills to improve your credit score. Start setting up reminders so that you won't forget paying your bills.
If you don't have a good credit score, it is recommended to invest some time and get at least a fair score. The time required here will depend on the several aspects of your credit report. If there is anything that needs to be improved, it will sometime but will eventually fade away.
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