Do you have a considerably poor score and want to improve it over a period of time? Before you proceed, remember that improving the score is not a short term phenomenon. It is a long-term process and requires consistent efforts. One can witness considerable improvement between 3 to 6 months but if there are serious issues such as missed payments or high credit utilisation then it may even take a year or longer to improve your credit score.
First and foremost, you must ensure that your credit card bills are paid on time, credit utilisation ratio is lower than 30 percent and refrain from applying for too many loans in a short span of time, leading to generation of hard inquiries.
Here we give some smart tips to help you improve your credit score over a period of time.
Tips to improve your credit score
I. Check your credit report: You should check your credit report from time to time. Ideally, you should check it once a year.
II. Pay all bills on time: Needless to mention that you should clear your bills on time. Even one missed payment can lead to loss of score by 50 to 100. Therefore, missing or avoiding an instalment should be completely avoided.
III. Reduce credit utilisation: Ideal credit utilisation ratio is 30 percent. This means you should use only 30 percent of the overall credit limit. If your credit limit is ₹10 lakh, you should only use ₹3 lakh of it.
IV. Avoid closing old accounts: There may be some old accounts which are non-operational. You should avoid closing them. When you close an old account, it leads to a higher credit utilisation.
V. Diversify your credit mix: This is not a panacea for higher score but it can help optimise it. Different credit options include credit card, personal loan, car loan, etc.
Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.