6 Tips to improve your credit score

A credit score is considered an indicator of one’s ability to pay back a debt on time. While credit scores usually range from 300 to 900, a credit score of 750 or higher is considered good.

A good credit score is absolutely essential if you’re looking to secure a loan at good interest rates, better repayment terms and quick approvals.

Here’s how you can boost your credit score and increase your chances of getting approved for loans.

1. Check your credit report for errors

Review your credit report from credit bureaus like CIBIL, Equifax, or Experian regularly. Mistakes such as unrecorded payments or incorrect information can drag down your score. Report any discrepancies immediately to have them corrected.

2. Timely payment of bills

Payment history is one of the most significant factors affecting your credit score. Late payments can stay on your report for years, negatively impacting your score. Whether it’s credit card dues, loan EMIs, or utility bills, make sure you pay all bills on time. Setting up auto-debit can help you ensure timely payments.

3. Limit credit utilisation

Credit utilisation refers to the percentage of your credit limit that you’re currently using. It’s recommended to keep this ratio below 30%. A high credit utilisation can signal financial distress to lenders, which in turn can lower your credit score. If possible, try to pay off balances in full each month.

4. Maintain a healthy credit mix

Lenders prefer to see a mix of both secured (like home loans) and unsecured credit (like credit cards). This indicates that you can manage different types of credit responsibly. However, don’t open new accounts just for the sake of diversification, only take on new credit if necessary.

5. Avoid multiple loan applications

Each time you apply for a loan or credit card, it triggers a hard inquiry on your credit report, which can impact your score. Multiple applications within a short period can be particularly damaging. Instead, focus on applying only when necessary and ensure your credit health is strong before you do.

6. Hold on to old account relationships

The length of your credit history plays a role in determining your credit score. Older accounts show a long-standing credit relationship, which can positively influence your score. Even if you’re not using an old credit card, keeping it open (provided it doesn’t carry a hefty fee) can be beneficial.

Pro tip: Monitor your credit score regularly

Staying informed about your credit score and understanding the factors that influence it is essential. Regular monitoring can help you catch issues early and take corrective actions swiftly. Many financial apps and services offer free credit score checks, making it easier than ever to keep an eye on your credit health.

By following these steps diligently, you can steadily improve your credit score and position yourself for better loan offers with lower interest rates. Remember, boosting your credit score is a gradual process, but with patience and consistent effort, it’s achievable.

04 March 2025

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