Improving your credit score is one of the basic financial activities that one should keep in mind. Credit card companies, banks, lenders, NBFCs, and financial institutions assess the credit score of consumers when they apply for a loan. If you want to improve your credit score, we have some tips, tricks and advice for you in this article.
A lot of people have low credit scores and face difficulties to increase their score due to lack of knowledge. New credit users need to be aware that their credit score is regarded as the foundation of their financial stability. The average person must have heard a lot about the credit scores, but they probably don't know what it means or how important it is. In this article, we will talk about what is a credit score and important advice on improving your credit score.
Credit score: Definition
A credit score is a three digit number assigned to every individual based on their credit history. This number doesn’t stay the same all the time; it keeps changing depending on your financial activities. Here’s a credit score advice – your score will vary from credit bureau to credit bureau as different credit bureaus use different algorithms to calculate your credit score. If you find different credit score from different credit reference agencies, there is nothing to worry about.
How is a credit score calculated?
Although different credit agencies use different algorithms to calculate your credit score, there are a few common elements that are always taken into consideration by all the credit bureaus.
Listed below are six (6) common elements that are considered for your credit score calculation:
Advice and tips to improve credit score
Your chances of getting a loan or credit card increases with a high credit score, and decreases with a low score. Because lenders and banks do not trust persons with low credit scores. To avoid getting your loan or credit card application rejected, here are some advices on how to improve your credit score:
Improving your credit score depends on a variety of factors. However, once you start taking steps to improve it, do not anticipate seeing the change overnight.
FAQs related to credit score advice
There are various things you can do to improve your credit score. However, 3 first things you can do for increasing your credit score is to repay the debts on time and in full, keep your debt utilisation ratio below 30%, and review your credit report regularly to identify the errors in it and get it fixed.
Some people may witness an improvement of 100 points in their credit score in 30 days. Increasing a credit score by 50 points in a month is not impossible, however, everything depends on your credit score.
Improving your credit score will take time. It is always advised to wait patiently for your credit score to increase when you are working on it. The time taken to improve your credit score depends on your financial activities.
A credit score of at least 620 is needed for a home loan if you have a collateral to offer against the loan. If you have a credit score of 750 or more, you will be getting home loans at lower interest rates. With a low credit score, lenders and banks will offer you loans at high interest rates.