31-May-2019 written by : FSI-Team
To determine how long it will take to get your credit score up to 750 all depends on what the score is to begin with.
If it is low because you haven’t availed of credit before, it may be a matter of just a few months before the score rises. On the other hand, improving your credit score is a process that takes time and cannot be done overnight if it is owing to a less-than-perfect credit history so far. If you’re looking for a quick fix by which the score will improve, there is unfortunately no easy answer. The prudent way to go about this, is to firstly identify the reason for a low score and then systematically work towards improving it. Let’s see how you can go about this process.
A credit score is a three-digit number between 300 and 900 that denotes your creditworthiness. Based on the credit report, this is essentially a summary that lenders consider when you apply for a loan or credit card. A score of 750 and above is considered to be excellent and denotes good financial health to a lender.
If you’re unsure what your credit score currently is, call for a free credit score from any of the four credit bureaus operating in India today. That is a great starting point to understand your credit health.
A low credit score is definitely something to avoid, especially since it will impact your financial health going forward. When your credit score is high, a lender will look at your loan or credit card application more favourably and offer fresh credit on the best terms. For instance, the interest rate will be competitive since the bank or financial institution is reassured about your willingness and ability to repay a loan.
Having a low score does not mean that credit will not be extended to you; however a lender is more likely to offer a loan at a higher rate of interest. This is because with a low score, a lender is unsure about your repayment capacity.
Now that we've established the importance of a credit score and why it should be high, let’s take a look at ways in which you can improve the score.
In order to improve CIBIL score you should take care of the following:
Always pay bills on time: Paying any loan or credit card outstanding in time is important because it’s the leading factor that depends whether a lender will extend credit to you. When you miss a payment, or delay it, you appear to be a risky borrower who could be in financial difficulties. Do set up a payment reminder or avail of an ECS option to make sure you don’t miss a payment due date.
Low credit utilisation: It’s never a good idea to use all the available credit limit on your cards because this can be a red flag to a lender with regards to your creditworthiness. Experts recommend that maximum 30 percent be used for it to reflect positively on your credit score. The lower your usage, the better it is.
Minimise enquiries on your credit report: Each time you apply for fresh credit, an enquiry is made against your credit report. This enquiry can lower your score for a few months, even if temporarily.
Keep old accounts: If you have a less functional credit card account, don’t close it if it has a consistently good repayment track record. This account can in fact boost your credit score owing to its vintage and prudent usage.
Maintain a good balance of credit: When you avail of a healthy mix of both secured and unsecured loans, they can help increase the credit score. Of course, make sure you make timely and full payments to get a good credit score over time.
Use a credit card: This is for those who have not yet forayed into availing credit lines yet. The best way to build a credit score from scratch is to apply for a credit card and use it prudently. The key is to make sure you display model behaviour in terms of payment and you can rest assured that your credit score will increase over time.
Now that you know what it takes to get and maintain a good credit score, your first step is to know where you stand so that you can take corrective action. A copy of your free credit score can point you in the right direction to help you improve CIBIL score.
Remember that your future financial health is determined by the credit score and that itself is reason enough to have a score of 750 and above.