Boost Your Credit Score With These Tips From Personal Finance Experts

A credit score plays a crucial role when you are applying for a loan or a credit card. It is a three digit number between 300-900, 900 being the highest, that depicts your creditworthiness.Credit scores are calculated by credit bureaus by taking into account your credit history and repayment behaviour. A higher credit score increases your chances of getting a quicker approval for loan or credit card. It is an important determining factor for banks and non-banking finance companies (NBFC) whether you are qualified for a credit or not.

Here are some of the ways in which you can boost your credit score:

1. Pay bills on time: It is extremely important to pay your monthly utility bills on time as this depicts a responsible payment behaviour. Your payment history is the biggest factor that determines a credit score. Avoid making delayed payments as it will affect negatively on your credit score. One of the simplest way to making bill payments on time is to give standing instructions to your bank to pay off your credit card bill automatically before the due date. So, even if you forget to pay the bill, it will be paid of directly on the particular date and you will not have to pay the late fees.
2. Monitor your credit report: Monitor your credit report regularly to ensure there are no errors. If there are any errors in your credit report, it could be one of main reason for a low credit score. You can dispute errors with the credit bureaus and get them fixed. According to the Reserve Bank of India (RBI), it is mandatory for all the four credit bureaus in the country -  TransUnion CIBIL, CRIF High Mark Credit Information Services Pvt. Ltd., Experian Credit Information Co. of India Pvt. Ltd and Equifax Credit Information Services Pvt. Ltd., to offer one free credit report in a calendar year.
3. Don’t close old accounts: Don’t close your credit card accounts as they could have a decent credit history. Losing on a good credit history will negatively impact your credit score. It is advised to keep all your accounts open as it will help you in building a healthy credit history. Removing old accounts could also lower your available total credit and increase your credit utilization ratio.
4. Low credit utilisation ratio: It is important to maintain a low credit utilization ratio. Your debt-to-income ratio is used by lenders and can be very influential when it comes to extending credit. This essentially means that your credit card utilization amount should be lower than the credit limit of your card. According to experts, you should avoid using more than 30%-40% of your credit card limit. Higher credit utilization ratio shows that you are overusing your money and will not be able to pay back the balance amount.

Building credit takes time and it is a long process. Therefore, it is important that you should be patient and careful while using credit cards.