02-Jan-2019 written by : FSI-Team
As we near the beginning of the new year 2019, it’s a good time to reflect on the days spent in the year 2018. The decisions you made in the past and how they affected your life can teach you many valuable lessons. On that note, if you want to achieve a high credit score in 2019, then you can make it happen by just following these 6 steps:
The first thing you must do is apply for your updated credit report or CIBIL report. If you didn’t apply for it this year once, then you may qualify for a free CIBIL score and CIBIL report as per RBI’s regulations. All you have to do is fill out a small form, and answer a few questions for verification. If all goes well, you can get your report within a few days or so.
The reason why checking your credit report is important is that it can tell you where you are currently standing financially. You need to know what your current CIBIL score is and whether there are any late payments in the report, etc. to figure out how much you need to work to get your score to a decent level.
What is your financial history comprised of? Is it based on just personal loans or a home loan? If your history doesn’t have variety, then it can prevent your score from growing at a good pace. But how can you fix it?
Improving credit variety is quite simple actually. For instance, if your history is based on just a personal loan, then you can get a new credit card and start using it responsibly. Similarly, if the history is based on just a credit card, then you take a small personal loan, auto loan, etc.
If you checked your free CIBIL score recently and found it to be below average, then one of the reasons behind it could be your frequent leaning towards minimum payments.
Most of the major credit card issuers allow the customers to pay their credit card bills with “minimum payments” which are usually 2% of the total amount. In this, you pay 2% of the bill and the rest of the balance is carried over to the next month. So, while this removes the immediate financial burden, it increases your debt in the long term and also collects interest. Thus, minimum payments can hurt your score which is why they must be avoided at all costs.
One of the most important things that you need to do if you want to increase your credit score quickly, is paying your credit card payments and EMIs of personal loans, car loans, etc. on time. In fact, even a few late payments can hurt your score greatly. So, make it a point that you are always on time when it comes to paying your debt.
Using credit cards helps in building a high credit score. However, it can also backfire if you don’t use your cards responsibly. For instance, if your spending excessively with your cards, then it may hurt your score. This is called high credit utilization.
If your credit utilization is above 30% then it’s bad for your credit health. For example, if your credit card limit is Rs. 1 lakh and you are spending more than Rs. 30,000 a month with the card, then it can hurt your score. So, if you want to increase your score, then make sure you use your credit card within the limit.
Discrepancies and errors in your credit report can also put a big dent in your score. These include typos in personal information (name, address, etc.) and financial data (credit repayment, loan details, etc.). However, you can check for these in your credit report yourself, and if you identify any mistake, you can contact your bank to have these corrected.
So, there you have it- some of the important advice on credit score, Be sure to follow them, and good luck!