How Can You Get A Perfect Credit Score?

A great credit score is your ticket to get an approval on your loan or credit card application. Lenders like banks and non banking finance companies take into consideration your credit score as it gives them an idea about your creditworthiness. A low credit score suggests you have been credit hungry and have not been consistent for paying your debt. Therefore, you should prioritize on improving your credit score. Let’s take a look at some of the simply ways that will help you get the perfect credit score.

What is a credit score?

A credit score is a numerical representation of your credit health. It ranges between 300-900, 900 being the highest. It is computed by credit bureaus after calculating your credit history, credit type, and repayment behaviour. A credit score of 750 and above is considered as excellent by majority of banks and NBFC. If you credit score ranges between 750-900, it suggests that you are regular with credit payments are have a really good payment history. A high credit score makes you eligible for getting low interest rate credit cards, approval for higher credit limits, home loans and car loans.

Steps to get a perfect credit score

• Check and monitor your credit report: Your credit report contains details such as current balance, loan amount, history of payment, credit limit, account type, account status, and payment history. Most importantly, it consists of your credit score. A credit report is prepared by credit bureaus in the country which are licenced by the Reserve Bank of India (RBI. At present, there are a total of four credit bureaus in India viz; TransUnion (CIBIL), Equifax, Experian Credit Information Company and High Mark Credit Information Services. When you check your credit report, you get an idea of what are the areas that you can work on and thereby improve your score.
• Pay bills on time - You should never miss any kind of payments. Make sure to pay all the utility bills and EMIs on time. When you pay bills on time, it suggest you have good debt management skills. Your lender will look into your reports to check for late payments, outstanding amount, etc. If you have been managing your debt effectively, it will improve your score and provide you with an option to negotiate your credit for better interest rates. You should also avoid making late payments as this can bring down your credit score.
• Always make full payments: You should avoid paying only the minimum amount due. Get into the habit of paying the entire bill amount every time. Do not pay minimum amount due on your bills as it will reflect badly on your credit score. It suggests that you are struggling to repay your credit debts. Also, if you keep paying minimum amount due on your bills, you might end up paying a huge amount in interest fees.
• Maintain a low credit utilisation ratio: A high credit utilisation ratio has a high impact on your credit score. Therefore, it is important to maintain a low credit utilization ratio. This essentially means that the utilization amount should be lower than the credit limit of your card. Higher credit utilization ratio shows that you are overusing your money and will not be able to pay back the balance amount. According to experts, you should ideally use 30%-40% of your credit card limit.
• Balance of mixed credits: You should maintain a good balance of credit. There are two types loan: secured and unsecured. A credit card is an example of unsecured credit while a home or personal loan is a secured credit. When you have different types of credit, it suggests that you are capable of handling different types of loans.
• Never close old accounts: You should not close your old credit card accounts as they could have a good credit history. If you lose the credit history, it will negatively affect your credit score. A good repayment behaviour reflects positively on you credit score. Always keep all your accounts open as it they help you boost your credit history thereby improving your credit score.
• Limit credit enquiries: Frequent credit enquiries also have a negative impact on your credit score. Making enquiries for a loan or a credit card are referred to as hard enquiries. Too many hard enquiries bring down your credit score. Hence, it is important to apply for credit cards only if it is absolutely necessary. Limiting credit enquiries will help you maintain a good credit score. Each time such a hard check is conducted, it will have a negative impact on your credit score.
• Increase your credit limit: One of the easiest ways to boost your credit score is to request your credit card provider to increase your credit limit. Once your credit limit is increased, you should continue using only 30%-40% of the credit amount. When lenders see that you are responsible in handling the credit, they will consider approving your loan or credit card application.

Hope all the above points will help you build and improve your credit score. It must be noted that to have a perfect score, you need to follow payment discipline.