The credit score is a number used by lenders and credit card issuers to check your creditworthiness. A score of above 700 is considered good and reflects your ability and willingness to repay your borrowings. So, if you are looking to apply for credit cards or personal loans, ensure that your credit score is good. This is possible by paying off your existing debt on time and maintaining a credit utilization ratio of 30% or less.
A higher credit score makes it easy for you to get fresh debt at attractive interest rates. The three-digit score is calculated based on the numbers of loans or credit cards issued to you, payments history, and the outstanding amount on them.
If you wish to boost your credit score, you can take these steps:
Pay Off Your Loans-
Credit scores take note of your total outstanding balance. So, if you have taken any kind of loans for education or a home loan, or any other purpose, pay them back. If you have a history of making late payments, it gets reflected in your credit score. You can avoid such a situation by activating payment alerts or using the automatic transfer facility to pay off your credit card bills or equated monthly installments on time.
Use More than One Credit Card–
If you are using a credit card to pay off your bills and other expenses, try to spread them over two or more credit cards with different billing cycles. This will give you adequate time to pay off all the due amounts without attracting credit card interest charges.
Pay Your Credit Card Dues in Full–
Ensure that you pay your credit call bills in full and on time. This means you will have not outstanding balances on which you will have to pay interest charges to your bank.
Optimise your Credit Utilisation Rate–
An optimum credit utilization ratio is 30% or less. You can achieve this ratio by keeping a close watch on your credit card expenses. You can even spread out your expenses for the month by using two or more credit cards with different billing cycles. Do avail of the free credit card offers available to you.
Review Your Credit Score–
This will help you identify troublesome items and work to remove them. If you find any mistakes in your report, you should get them rectified immediately.
Do Not Remove Old Accounts–
Avoid removing old accounts or accounts that have been deactivated from your credit history. This is important because you may have a good payment history in these accounts that gets reflected in your score. Again, if you have repaid these debts it will boost your score and reflect your creditworthiness.
Do NotClose Credit Cards That You Do Not Use –
Even if you are not using a credit card, it is contributing to your scores. It means you are using a lesser proportion of the credit available to you and so your credit utilization ratio is higher.
The key to boosting your credit scores is to pay your credit card bills and other dues on time, not utilise the available credit fully and keeping track of your credit report. A good credit score can help you get a free credit card or card with no annual fees.