Having a good credit score is essential in India, as it determines your creditworthiness and plays a significant role in obtaining loans and credit cards. A higher credit score, such as 750+, increases your chances of securing better interest rates and loan terms, providing you with more financial opportunities. Delve in to get a better understanding on how to increase credit score.
At Shriram Finance, we understand the importance of a good credit score in achieving your financial goals. There are various ways to increase the creditworthiness for loans or credit cards. In this article, we will provide you with five valuable tips on how to improve your low credit score quickly. So let's get started on the path towards improving your credit score and securing a brighter financial future. This guide will also tell you different ways on how to clear credit score if you have a low or a bad credit score.
Key Highlights:
- Prioritise paying off high-interest debts using strategies like the debt avalanche or debt snowball method.
- Make timely EMI payments every month.
- Seek loan modifications with your lenders for more manageable repayments.
- Minimise hard inquiries by avoiding unnecessary credit applications.
- Keep old accounts open and address delinquencies promptly.
Why Does a Good Credit Score Matter?
A good credit score is essential to get loans and credit cards on favourable terms. A higher score means good financial responsibility, which means lower interest rates and better loan terms. For example, people with lower credit scores may have difficulty getting a mortgage or end up paying much higher interest rates on auto loans, limiting their ability to make major purchases and affecting their overall financial well-being. Explore ways on how to clear credit problems along with tips on how to increase credit score without credit card.
Shriram Finance's Credit Health Report equips you with the knowledge to make credit decisions that benefit you. (Note: Hyperlink redirecting to the page to be added)
Try to Pay Off High-Interest Credit Cards and Loans
Paying off high-interest debts is the very first and crucial step in the journey of how to improve low credit scores. High-interest debts can significantly impact the credit score and financial health of an individual. To increase credit score immediately, it's crucial to prioritise paying off these debts. Start by identifying the high-interest credit cards or loans that are dragging down the credit score.
For example, let's say you have two credit cards with outstanding balances - Card A with a balance of ₹50,000 and an interest rate of 18% per annum, and Card B with a balance of ₹30,000 and an interest rate of 12% per annum. By paying off Card A first, you can save money on the higher interest charges and make quicker progress towards improving your credit score.
Below are the methods mentioned that will teach you how to increase credit score from 600 to 750. To tackle multiple debts efficiently, consider using either the debt avalanche or debt snowball method. The debt avalanche method involves prioritising debts based on their interest rates, starting with the highest rate first. This helps save money on interest charges in the long run.
On the other hand, the debt snowball method involves prioritising debts based on their balances, starting with the smallest balance first.
Here's a comparison table highlighting the benefits and drawbacks of both methods:
Debt Avalanche Method:
- Saves more money on interest charges
- It may take longer to see significant progress
Debt Snowball Method:
- Provides quick wins and motivation
- It may result in slightly higher interest charges
If you are looking for a way on how to increase credit score immediately, choose from any one of the methods that aligns with your goals and preferences. Also, pay off high-interest debts timely and build a high credit score.
Complete your EMI payments on time every month
Repayment history has a significant impact on your credit score. To ensure timely repayments, consider setting up automatic payments or reminders. Many banks and financial institutions offer the option to set up automatic EMI deductions from your bank account.
Paying EMI gives you a good start on the journey of how to improve low credit score.
Seek for Loan Modification with Your Lender
If you're struggling to meet the loan repayment obligations, seeking a loan modification from your lender can be a beneficial option. Loan modifications can help improve the credit score by making the repayment terms more manageable.
Contact your lender and discuss available options such as lowering the interest rate or extending the repayment terms. By modifying the loan terms, you may be able to reduce the monthly instalment amount or extend the loan tenure, providing some breathing space which ultimately helps to increase credit score. By following these strategies, you get answers on how to increase credit score quickly.
To correct credit score you must think about initiating a loan modification request:
- Contact your lender's customer service department.
- Explain the challenges you are facing in meeting the current repayment terms.
- Provide necessary documentation such as income proofs or financial statements.
- Discuss possible loan modification options with the lender's representative.
Avoiding hard inquiries to raise your credit score
Hard inquiries occur when lenders assess your credit report for new credit applications. While necessary for borrowing, they can temporarily lower credit scores. To raise your credit score, limit new credit applications unless crucial. Minimise hard inquiries by:
- Applying only when needed
- Researching lenders' criteria beforehand
- Using prequalification tools
- Consolidating loan applications on the same day
- Prioritising responsible credit behaviour over frequent applications.
Keep Old Accounts Open and Deal with Delinquencies
Maintaining a long credit history is essential for a higher credit score. It's advisable to keep old accounts open to improve credit score. These accounts demonstrate creditworthiness and contribute to a positive credit history of an individual.
Closing old accounts can shorten your credit history and potentially lower the credit score. Follow the below-mentioned strategies to quickly track ways on how to build credit scores.
What Factors Influence My Credit Score?
Several factors influence your credit score, including:
- Credit utilisation: The ratio of how much credit is used compared to how much is available.
- Payment history: How consistently you have made on-time payments in the past.
- Length of credit history: The duration of time for which you have been using credit.
- Credit mix: The variety of different types of credit used, such as credit cards, loans, and mortgages.
- New credit applications: The frequency at which you apply for new credit. Making timely payments, keeping track of the credit utilisation ratio, and diversifying credit limits will help on ways how to increase credit scores in 30 days.
How Can I Check My Credit Score Online?
You can check your credit score online through the official website of Shriram Finance. To obtain the credit score report, follow these steps:
- Visit the Shriram Finance website (Note: Hyperlink redirecting to the page to be added)
- Click on the "Check Credit Score" option. (Flow info to be added)
- Fill in the required personal information and submit the form.
- You can share or download the free credit report.
Improving a low credit score is crucial for accessing better loan terms and financial opportunities. By implementing these five tips, you can start building a higher credit score today.
Shriram Finance offers solutions for various needs, such as vehicle loans, personal loans, and home loans, which are designed to cater to individuals looking to improve their credit scores. Start improving your credit score today and unlock a world of financial possibilities with Shriram Finance.
FAQs:
1. What is the best advice to improve a low credit score?
The best advice to improve a low credit score is to prioritise paying off high-interest debts, make timely EMI payments, avoid unnecessary credit applications, maintain old accounts, and address delinquencies promptly.
2. How do you recover from bad credit?
To recover from bad credit, it is crucial to improve your payment history by making timely repayments, paying off outstanding debts, minimising new credit applications, and maintaining a low credit utilisation ratio.
3. What is the fastest way to fix bad credit?
The fastest way to fix bad credit is by consistently making on-time payments, and paying off high-interest debts first. Additionally, regularly reviewing your credit report and disputing any inaccuracies can expedite the process of improving your credit score.
4. How do I clear my credit report?
To clear your credit report, start by reviewing it for any errors or discrepancies. If you find any inaccuracies, dispute them with the relevant credit bureaus.
5. How can I improve my credit score daily?
You can improve your credit score daily by practising responsible financial habits such as making timely payments, keeping credit utilisation low, avoiding unnecessary debt, and monitoring credit score regularly.
6. How to go from 650 to 750 credit score?
To increase your credit score from 650 to 750, focus on timely payments, reducing credit card balances, diversifying your credit mix, and checking for errors on your credit report.
7. Best way you can improve your credit score?
The best way to improve your credit score is by consistently paying debts on time, maintaining low credit utilisation, and addressing any negative items on your credit report.
