5 Clever Ways to Improve Your Credit Score Fast

Has your research in finding the best lender who offers the lowest interest rates turned futile? Has your loan been rejected despite being eligible? Has your lender asked you to pay an increased instalment compared to others? 

Are you looking to get the best home loan deals in the market? If your answer to any of these questions is a yes. Then it is time to inspect your credit history and get to know your score. 

If your credit score ranges between 700 to 900, you need not worry, there is a good chance of your application getting accepted. However, if your scores do not fall under this range, you will have to take the necessary measures to improve them. 

Why is a high credit score important?

A credit score is a critical numerical value that determines your financial health. A high credit score is advantageous in obtaining low-interest home loans, better terms, higher repayment tenure and better deals. A slight difference in interest rate will help you save a significant amount on your finances. Building and maintaining a credit score is a continuous process that is beneficial for the long run. So, here are five ways that could help improve your credit score.

5 Clever Ways to Improve Your Credit Score Fast

 

• Reduce your Credit Utilisation Ratio

Several factors determine your credit score; the credit utilisation ratio is among them. The credit utilisation ratio is the monthly credit you use, divided by the total amount of available credit. 

Credit Utilisation Ratio =    Total Debt

______________

Total Available Credit

Maxing out your credit card and repaying the entire amount in time doesn’t improve your credit score. On the other hand keeping your credit utilisation at 30%  will help you improve it. The reason behind this is that maxing out your credit limit will show irresponsible financial behaviour. Hence keeping your credit card dues to a minimum is advisable to keep credit scores in check.

• Repay your Loans on Time

No matter what debt it is, repaying your credit card bills, home loans, and other debts on time will improve your credit scores drastically. Getting into this habit will also benefit you by avoiding late payment fees as well. Activating an auto-debit feature or keeping timely reminders for your loans will help you pay your dues on time. A disciplined credit habit will automatically improve your credit score. Suppose you feel that your current EMI is unaffordable, which could be a reason for not making timely repayments. In that case, you can talk to your lender and change the instalments according to your convenience. Always pay your EMIs and credit card bills in full. Paying only the minimum amount due or Part payment will cause accumulation of debt, which will weaken your credit score.

A smart idea is to use a loan EMI calculator to calculate your instalments monthly before applying for a loan. This tool will help you arrive at an affordable EMI  at the optimum tenure for a given interest rate, so that the EMI can fit within your budget. EMI calculator is free of cost and does not require any registration. You can quickly access it online from a trustworthy lender’s website and calculate according to your convenience.

• Pay More When Your Finances Improve

Suppose you have loans that span for a longer tenure, like home loans. You can make a prepayment when your finances improve. It will reduce your loan interest rates along with the principal amount and tenure. However, It is necessary to check if your lender’s terms have increased prepayment charges to save on your loan. Prepayment will also increase your credit scores considerably as it again reduces your credit utilisation ratio.

• Avoid Applying for Multiple Loans

Each enquiry on your credit score will cause it to dip for a while temporarily. Applying for multiple loans will lead to numerous enquiries, which lowers your credit score. In the worst-case scenario, when the second lender sees that your credit score is less, they will even reject your loan application making the credit scores dip further. If you are looking for low-interest home loans, it is advised to research well and apply for your loan only with one lender whose approval you are sure about. 

• Fix Credit Report Errors

Yes! There could be credit report discrepancies that might be causing your low score. The reason could be not obtaining a NOC from your previous lender or a simple error. You can avoid mistakes in credit reports by checking your credit report from time to time, and it takes just a few minutes and can be done online as well. 

If you have been paying your debts on time and doing the steps mentioned above and yet your credit scores are low, you will have to rectify your credit report. If you find a discrepancy or an error, you can file a dispute with the credit bureau online with the details of the error, and they will rectify it quickly.

Your credit scores will improve with patience and persistence. All the above efforts will boost your credit score and advocate your credibility to the lender. Maintaining and improving it will help you secure the best loans in the market.