Unquestionably, loans and credit cards assist us in meeting important financial objectives, handling monetary emergencies, maintaining a high level of liquidity, and taking care of any unforeseen financial needs.
And everyone’s financial life requires prompt repayment of loans and credit card balances which they have taken. On the other hand, careless usage of these credit options might harm both your credit score and your ability to manage your money. The damage to credit score would be reflective when you do SBI CIBIL score check.
Given that a low credit score can harm your chances of getting any form of credit approved, the following are the best financial moves that can help to raise your credit score:
Try your best to always pay your payments on time
Credit reporting agencies carefully review even a small payment history to determine whether you have been a reliable borrower. About 30% of the variables used to calculate your credit score are related to your payment history, which is also an important component. Never forget that paying your credit card bills on time and consistently raises your credit history, enhances your likelihood of obtaining a good credit score, and makes it easier for you to obtain an urgent loan when you need one. Your credit score will drop and you can see that through SBI CIBIL score check if there is any irregularity or payment default, which may be found when you examine your credit report and have access to a free CIBIL score.
Apply for credit to demonstrate your commitment to timely repayment
Your credit score is largely based on your credit history. Because the money you spend using a credit card is the card provider’s money and you are, in this situation, a creditor for the credit reporting agencies, using credit cards regularly for different charges aids in the development of credit history. Due to the fact that using them to make payments is the same as borrowing money, they make it straightforward for people without credit histories to create ones. Your credit score cannot be calculated without a credit history.
If you don’t have a solid credit history, lenders may still approve your loan application, but at a higher interest rate. Lenders put their decisions on the basis of your credit repayment history. With the opportunity to do SBI CIBIL score check for free nowadays, delaying the establishment of a credit history—which, fortunately, progressively raises one’s credit score over the course of a few months—makes little sense.
Maintain a credit usage rate of no more than 30%
If you have a low credit usage ratio, you will be well-regarded by the credit reporting companies. Credit hungriness, which is shown by increased credit use, is detrimental when credit scores are computed and reflective when you do check credit score every month. You may see this for yourself when you obtain your credit score, look into the factors that went into it, and look into the causes of whatever happened. To reduce your CUR, you should apply for a new credit card or ask for an increase in your current credit limit if you occasionally spend more than 30% of your available credit.
Continue to check your credit report each month
When you do SBI CIBIL score check, are your aware that your credit score is calculated by credit bureaus using the credit information report (CIR) that the bank or other financial institution provides?
Every loan and credit card you’ve ever had is listed on your credit report, along with details about your payment history. By routinely reviewing your credit report, whose CIBIL score is its most important component, you can spot any inaccuracies or frauds and submit them to the credit bureau and lenders for correction. As a result, it is advised that you check credit score and monitor your credit report on a regular basis to ensure that you don’t overlook any errors that could lower your credit score. Go to a website that offers free credit reports and check credit score yourself.
Apply for credit on a periodic basis
Numerous and frequent credit card and loan applications, especially for unsecured loans like personal loans, can damage your credit history because they give the impression that you are in dire need of money, even if that isn’t entirely accurate. Your debt burden may have grown or will likely grow as a result of your excessive credit use, which increases the likelihood that you won’t be able to pay back any future loans. Even worse, the lender can increase the interest rate it charges you on account of your need for credit. Additionally, the damage to your credit score caused by making many credit application requests quickly would likely become obvious in the months that followed.
Be careful not to ask for loans directly and too frequently
While your did check credit score and saw that it is already poor, contacting banks and other financial institutions directly about loans could harm it. Even though you are aware of how significant your credit score is, asking for new loans directly from lenders will lower it since all of this data will be recorded on your credit report. Avoid making direct inquiries; instead, use online markets to safely determine your credit worthiness. Your goals will be achieved while also safeguarding your credit report and score if you accomplish this.
Close out previous credit accounts carefully
Early loan and credit card accounts lengthen your credit history and increase your credit age. By fully repaying previous high-interest loans or closing out previous credit card accounts, you can also raise your credit score. Increase the percentage of secured loans in your portfolio by paying off any unsecured loans with higher interest rates, and lenders and credit agencies will see you favourably.
Possess a diversified mix of credit
A healthy credit mix includes more secured loans than unsecured loans. Home loans, business loans, gold loans, etc. are examples of secured credit, whereas credit cards and personal loans are examples of unsecured credit. Since lenders typically favour larger shares of secured loans in credit portfolios and because credit bureaus also score such borrowers better, having a higher percentage of unsecured credit could be detrimental to your credit score. Therefore, if you want to improve your credit history and score, you should choose to prepay your unsecured loans first.