If you have a poor credit score, such as 650 or lower, it is not easy to get a loan from a bank. And, if you are lucky – a bank or non-bank finance company (NBFC) may charge higher approved loan rates.
Meanwhile, if you plan to raise a large loan sometime next year or by the end of this year, you can consciously try to improve your credit score. There are some ways to try and test it to improve your credit score. These include reducing credit utilization, clearing debt, obtaining secured credit cards, and a diversified credit portfolio.
Here we list the most effective and feasible steps to improve your credit score
7 key tips for improving credit scores
1. Check the credit report: Get free credit reports from credit bureaus such as CRIF High Mark. Identify errors or differences and object to the credit bureau.
2. Pay bills on time: Avoid paying on credit cards, loans and EMIs. You can set up automatic payments for timely payments.
3. Reduce credit utilization: Keep credit utilization below 30% (i.e., use only ₹If your credit limit is 30,000 ₹1,00,000). Pay off your credit card dues before the reduction of the utilization date.
4. Pay off outstanding debts: First clear any overdue loan or credit card bills. If you have multiple debts, consider the snowball method (the smallest first) or the avalanche method (the highest interest first).
5. Get a secure credit card: If the score is low, apply for a secured credit card (such as SBI card, Axis Bank Insta Easy) for your fixed deposit.
6. Diversified credit portfolio: Having a mix of secured loans (home/car loans) and unsecured loans (credit cards, personal loans) helps to improve your score.
7. Avoid multiple credit applications: Frequent credit applications will cause strict inquiries, thereby reducing scores. If the loan is denied, please wait for a reapply.
((Note: Raising a loan has its own risks. Therefore, it is recommended that you be cautious)
