Here’s What You Should do to Improve the CIBIL score After Settling Your Credit Card

The golden rule to avoid landing in the credit card debt is to pay the bills on time every month and avoid piling it up over time. However, sometimes unknowingly you end up with dues and you have to settle the outstanding credit card debt by accepting the settlement offer made by the company. Now that you have settled your credit card, you should take necessary measure and start focusing on improving yourcredit score. Let’s take a look at some of things that will help you improve your credit score

1. Continue using your credit card

Most of the people stop using their credit card if they find themselves in the situation of credit settlement. However, this will not help their credit score in any manner. In order to build a healthy credit score, you should keep using a credit card. Make sure to be a responsible borrower and start using your credit card to make purchases or paying bills.

2. Timely bill payment is the key

One of the biggest factors that affect your credit score is your repayment history. It accounts for 35% of your credit score. Making bill payments on time should be your utmost priority as late payment of bills hampers your credit score. Never miss a bill payment date as your credit score will take a hit and, in addition, you have to shell out more money for late payment charges and interest. Being consistent in your bill payments suggests that you are a reliable borrower and thereby posses a lower rate of turning a defaulter. There are several ways in which you can pay bills on time. For starters, you can give activate standing instructions to your bank to auto-debit your credit card bill before the due date.

3. Don’t close old credit card accounts

Your old credit cards might have a good credit history as well as consistent repayment behaviour. If you close your old credit card accounts, you lose out on the credit history thereby bringing down your credit score. Therefore, even if you are not using your old credit card, leave it open for as long as possible as it increases the age of your credit history. The age of your credit history accounts for 15% of your credit score. Along with lowering your credit history, closing old credit accounts can also lower your available total credit and increase your credit utilisation ratio.

4. Pay off all the dues

If you have any pending bills or EMIs that have not been paid, clear them off at the earliest. Any pending payment can still have a negative effect on your credit score. Having unpaid bills for a long time suggests that you are not prompt regarding your payments. Such irresponsible repayment behaviour will be marked down by lenders at the time of approving your credit card or loan application. Therefore, even if the dues are pending for a long time, go ahead and pay them off as it will only help your credit score.

5. Balanced credit mix is the key

It helps your credit score if you have mixed types of credit. There are two types of credit - secured and unsecured. This essentially means it is good to have a car or home loan as well as a credit card. The type of your debt accounts for 10% of your total credit score. When you have a good balance of mixed credit in your credit report, the lenders will know that you have experience in handling both the type of credits. However, this does not mean that you should take a loan when you don’t need it. You should just keep in mind to balance out your credit scores.

6. Don’t open multiple credit accounts at the same time

You should be extra careful and make sure not to open multiple credit accounts at the same time. Instead, you can apply for credit at decent intervals. Each time you inquire about a loan or credit card, an inquiry is placed on your credit report. Such inquiries are called hard inquiries. Multiple hard inquiries will bring your credit score down. Credit inquiries account for 10% of your total credit score. Also, frequent credit inquiries make you look credit hungry and thereby affect your credit or loan application. Ideally, you should time your credit application to avoid this.

7. Maintain a low credit utilisation ratio

Credit utilisation is the percentage of the credit limit which is being used by a customer. It is the second biggest factor that affects your credit score. The total amount due accounts for 30% of your credit score. One of the easiest ways to maintain a low credit utilisation ratio is to pay the full amount of all your bills/EMIs. Maintaining a lower the credit utilisation suggests that you are using the credit in a responsible manner. One of the fastest ways to maintain a low credit utilisation ratio is to request for a higher credit limit on your credit card. You can also apply for a new credit card to reduce your credit utilisation ratio. In the end, you should also keep a tab on your spending habits if you are struggling to maintain a low credit utilisation ratio.

Hope all the aforementioned points will help you in working towards boosting your credit score and pave the way for an easier credit card or loan approval.