With these helpful tips on how to improve your credit score in 2023, lenders will give you better deals and better interest rates.
A good credit score is among the most important indicators of your financial health and tells lenders about your attitude toward credit. The higher your credit score, the better your chances of getting a new credit card, line of credit, or even a loan, especially when you need it the most.
In a previous post, we talked about how important it is to have a credit score, especially for people who are “new to credit,” and how to build one.
How does your credit score come together?
The most important part of your bureau score is how you’ve paid your bills in the past. The idea is that if you don’t pay back your other loans or credit cards, it’s very likely that you won’t pay back your new ones either.
So, being late on a loan or credit card payment makes it much harder to get a new one. Your credit history, how you use your credit, the types of credit you have, and how much new credit you have are also parts of your credit score. Find out more about the things that can affect your credit score.
7 ways to improve your credit score
The easier part is getting a credit score. Your credit score goes up or down over time based on how you use credit products. These tips on how to improve your credit score will help you keep your score high.
1. Pay back your loans and credit cards on time
Whether it’s a loan payment or a credit card bill, it’s important to pay on time because your payment history is the most important factor in figuring out your credit score. If you tend to forget or are too busy, set payment reminders for all your bills and payments at least two to three days before they are due. This gives you a little extra time.
You can also set up automatic bill payments through the Netbanking feature of your bank to make sure you don’t forget to pay any bills. Most loan EMIs are taken directly from your bank account, based on the instructions you gave to the lender. This reminder will help you make sure your account has enough money on the EMI date.
2. Don’t use up too much of your credit.
If you like to live life on the edge, this will have a big effect on your credit score. It’s fine to use your credit card to pay for everything so you can get discounts, reward points, etc., as long as you can pay back the full amount by the due date.
But if you only pay the Minimum Amount Due and keep carrying the balance over to the next month, you not only have to pay interest, but you also use up more of your total credit.
Try not to use more than 30% of your available credit limit at any given time, and keep the balances on all of your cards low. Your credit score goes up the less you use your credit.
You could also try asking your bank to raise your credit limit. If you already have a high credit score, your bank may send you an offer saying you’re eligible for a higher limit. This could lower how much of your credit you’re using. Do keep in mind that, depending on your bank, requesting or accepting the increase in your credit limit could have a short-term effect on your credit score.
3. Get a credit card with a deposit.
You can get a secured credit card if you want to keep using a credit card but can’t pay your bills on time or just want to be more responsible. The credit limit on these cards is usually between 75 and 85% of the amount of the collateral, which is usually a Fixed Deposit (FD) held with the issuing bank or financial institution.
If you’ve been turned down for credit cards or loans in the past because of a low credit score, a secured credit card can help you build a better credit score and credit history, as long as you use it responsibly and pay your bills on time.
4. Don’t try to get new loans or credit cards unless you have to.
When you apply for a new loan, line of credit, or credit card, the lender will look at your credit report from one or more credit bureaus. This will show up as a “Hard Enquiry” on your credit report. If you have too many “Hard inquiries,” your credit score could go down, and your “credit age” could also go down. Don’t get a loan or credit card unless you really need it or it’s an emergency.
You can also get your credit score and credit report as a customer. This is called a “Soft Enquiry” by the credit bureaus, and it does not hurt your score. Every month, you can use the OneScore app to check your credit score for free from CIBIL and Experian. This won’t hurt your credit score.
5. Telling them about mistakes in your credit report
No system is perfect, and even if you are responsible for your credit, an error in your credit report could be hurting your credit score.
It’s very important to check your credit report often because that will help you find any mistakes and fix them right away. In the OneScore app, you can send a question to the bureau about any part of any credit product, keep track of the question, and get a response from the bureau once they confirm that your question is valid.
6. Aim for a good mix of credit
Mixing up the types of credit you use is an important ranking factor not only for figuring out your credit score but also for raising it and building a good credit history.
There could be a mix of secured and unsecured loans, credit cards, a line of credit, and so on. This shows that you can take care of your credit in a responsible way and gives you more stability, like a home loan.
7. Don’t get rid of old credit cards
Another important part of figuring out your credit score is how long you’ve had credit. As you get older and your income goes up, you’re more likely to apply for high-end credit cards and close the accounts for your older cards. This can, however, hurt your credit score.
Even if you apply for new credit cards, try to keep your old ones and use them occasionally for small purchases to keep them active.
How to get a better credit rating
- Make sure to pay your bills on time.
- Don’t use up too much of your credit.
- Don’t close old accounts.
- Use programs that can help you improve your score.
- Only ask for credit if you really need it.
- Be patient.
- Keep an eye on your credit.
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