28-Nov-2016 written by : FSI-Team
If you own a credit card or if you ever took a loan, you must be aware that a credit score is an important instrument used by the lenders to evaluate your creditworthiness. Your past financial history is a strong reflection of how you are likely to meet your future debt obligations. If you have a sound track record of on time payments of EMIs you will have a healthy score and you can easily secure loans in future too.
But what if due to some financial troubles, a job loss or a medical emergency you were not able to pay your dues on time; late and missed payments would have brought your score down. If you anticipate a loan requirement in the near future you will need to improve credit score in order to ensure that you get an approval at a reasonable rate of interest.
Here are some strategies that will help you increase credit score fast. Use them before you apply for a house loan or car loan to secure an easy approval and favourable terms.
Pay credit card balances - If you are in the habit of charging most of your expenses to your credit card then your credit utilization ratio may be high. Even if you pay your bills in full each month running high balances can still hurt your score. Paying down your balances is the smartest way to boost your credit score. It reduces the percentage of credit line you are utilizing and therefore has a positive impact on the credit score. If you are nearing the credit limit often it is a good practice to make payments twice a month to avoid reporting of huge balances to the bureaus.
Clear past due accounts - Payments which are more than 90 days late cost you a lot of credit score points. If you wish to boost your credit score fast pull out your credit report and see which all accounts are past due. You need to clear all pending payments on loans (starting from the oldest) as quickly as possible to ensure that this factor does not pull your score down.
Ask for a goodwill adjustment from the lender - In case some collection account is reported on your credit report it will not go off even if you make the payment now. Talk to the lender and offer him the balance amount and request for a goodwill adjustment. If he understands your situation that caused you to miss a payment he might be ready to take the late payment record off your credit report. This will bring an immediate boost in the credit score.
Automate payments - In case you miss payments more due to forgetfulness than a financial difficulty then consider automating your payments. This will ensure a consistent track record of on time payments which will in turn increase your credit score.
Use old credit cards once in a while - Credit card companies may close your old credit cards if you no longer use them. Such an action will bring your score down as it will reduce the average age of your accounts. The longer the length of the credit history better it is for your cibil score. So use your old cards once in a while to charge an expense and keep it active.
Check your credit report for errors - Inaccurately reported credit information on the report can also be a reason for a low credit score. Order your report and validate every minute detail like the name, address, no. of accounts, outstanding balances and credit limits. If there is an error dispute it and get it corrected. This will help increase credit score.
Credit limit increase -An increase in the credit limit will reduce your credit utilization ratio and positively affect your credit score. You can either ask the existing credit card companies to offer you a raise or you can obtain a new secured credit card. Either way your credit limit will get a boost and increase credit score.
These strategies will not only bring an instant rise in the score by a few points but also set a strong foundation for a healthy financial future. Remember a long standing record of on time payments and low utilizations is the mantra to keep your score healthy.