A credit score is a three-digit numerical representation calculated by authorized agencies in respective countries through a mathematical algorithm to assess the credibility of a creditor or a prospective creditor. This score is based on several factors like credit inquiries, repayment history, credit utilization, and length of credit card history, etc. The lender individual or organization most certainly checks the credit score of a creditor, which helps them to reach a decision on whether to mete out a loan, credit card, and the credit limitation. It is a ready reference to the credit history of a lender also. In India, a CIBIL score is used as a parameter of credit score.
In the present day economy, buying goods to invest in properties, and running businesses are initiated by taking loans from banks and organizations, having a good credit score becomes a necessity. In fact, there are certain factors that help to achieve an impeccably perfect credit score which not only gives access to loans but also its easy availability and credit limitation.
Following are the ways in which one can improve their credit score: –
Regular timely payments: A lot of importance is given to the fact that whether the lender does pay their EMI on time. This involves good management of credit cards and loans of the creditor. Setting reminders of dates of payment is an essential part of the process.
Low Credit Utilization: About 30% weightage is given to credit utilization. The key factor is to keep the balance low and self-disciplined utilization of the credit limit amount. The creditor needs to keep a check on the amount which is being utilized.
Payment of utility service bills: This involves the on-time payments of utility services like electricity, internet, and phone bills. This record helps in the evaluation of the payment pattern of the creditor which eventually builds up a good credit score.
Be an Authorized User: This is useful if there is someone who has a good credit history, authorizes another as a user of the account, it will automatically raise the credit score of the authorized user. The most important factor here is to find a friend, relative, or colleague with a good credit score and record o payment.
Secured accounts: The creditor does have the option of depositing certain amounts and paying for credit through this by opening a secured account. This process will not only give an impetus to the credit score but also ensure regular timely payments.
Self-Reporting: This is a way that can be taken if the creditor has got a limited history of credit payment. This takes place through certain net-based programs that accumulate financial data of the creditor like rent payment, savings account details, etc for ready references. These programs have links with the credit bureaus also. The creditor must be mindful of reporting such financial data that are free from delayed payments or any other anomaly.
Keeping old credit card: The old credit cards should not be closed because certain weightage is given to the maintenance record of the credit card. It helps in achieving a good credit score for a creditor.
To boost your credit score, there are some measures you should incorporate into your life. It is important to remember, however, that these measures won’t lead to an immediate improvement in your ranking. Simply improving your credit will make life simpler and give you a greater chance to apply for the best deals on loans or credit cards.