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Check out the tips to improve your credit score

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If you spot discrepancies, dispute credit report errors to enquire about the 'Unknown Errors' which can affect your credit score unnecessarily

The credit score is often considered an important measure of one’s financial health, as it tells lenders how responsibly an individual uses his/her credit.

In today’s article, we will discuss about the quick and simple solutions to improve your credit score, which will help you look ‘responsible’ in front of the lenders as they remain confident about your ability to manage debt.

Strategic Payment Of Card Balances

Credit utilisation is the sum total of balances on all of your credit cards divided by the total of your credit limits. The less available credit you use, the better your score gets.

Pay your credit balances on time and in full. Use less than 30% of your card limit. Make sure your credit balance is low, as the payment card insurer reports it to the credit bureaus.

That figure will then be used to calculate your credit score.

The Game Called ‘Higher Credit Limit’

In case your credit limit is going up and your card balance remains the same, it will lower your overall credit utilization and improve your credit. If your income has gone up or you have added more years of positive credit experience, your credit limit too will get a higher limit.

You can request the concerned authorities to get your credit limit higher.

Also, try to avoid a ‘Hard Credit Inquiry’ from the card issuer as it will temporarily drop your score.

Once the credit bureaus come to know about the higher limit, it will automatically lower your credit utilization, but with one condition, you don’t overspend your credit.

Credit Piggybacking

Do you have a relative/friend who possesses a credit card account with a high credit limit, apart from having a good history of on-time payments? Feel free to ask him/her to add you as an authorized user.

This will add the account to your credit reports and the credit limit can help your utilization. The phenomenon, known as ‘Credit Piggybacking,’ allows an ‘Authorized User’ to benefit from the primary user’s positive payment history.

And yes, you can enjoy the benefits of being an ‘Authorized User’, without even asking your near one his/her card details and account number.

Pay bills On Time

A late bill payment will remain on your credit reports for close to eight years. Don’t be a laidback after missing a payment deadline. Call the creditor, pay the amount and ask whether the concerned authority will consider reporting the missed payment to the credit bureaus.

Also, remember that there are two types of credit enquiries, soft and hard. In case of a soft one, you check your credit score to become credit aware. However, when a lender/card issuer fetches your credit report from the credit bureau against your credit application, it is considered a hard enquiry.

Don’t go through multiple hard enquiries in a short span of time, because it will make the lenders believe that you may possess higher risks of credit default. This will lead to credit application rejection, apart from your credit score getting lowered.

Dispute Credit Report Errors

Feel free to ask for reports from the major credit bureaus. Also, there are third-party websites like AnnualCreditReport.com, which helps to generate credit reports from major bureaus. These reports contain details like ‘Late Payments’ and someone else’s credit activity getting mixed with yours. If you spot discrepancies, dispute credit report errors to enquire about the ‘Unknown Errors’ which can affect your credit score unnecessarily.

Once the mistakes get rectified by the credit bureaus, your credit score will increase.

Deal With Collections Accounts

Try to pay off a collections account, as the action will ensure that you won’t be sued by the creditor over the debt. You can also persuade the concerned agency to stop reporting the debt once you pay it.

The collection account can also be removed from the credit report, in case the figures are inaccurate or too backdated to be listed. It will ensure that your credit report won’t carry a negative mark on your credit report.

Monitor Your Loan Accounts Regularly

As a loan applicant, if you are not meeting some of the pre-determined eligibility set by the lender, the latter will ask you to get the application document co-signed/guaranteed by a co-applicant who has better creditworthiness. The logic behind the move is that in case you fail to repay some part of the loan that can be repaid with the guarantor’s assistance.

However, the non/delayed payments of EMIs on time affect the credit scores of both the co-signor/guarantor and the borrower. So if you are one of the borrowers or the co-signer/guarantor, regularly monitor whether the EMI repayment has been done on time and discuss it with the other individual.

Longer Repayment Tenure & A Bigger Credit Limit

Longer loan repayment tenure will present you with more cash in hand and a lower monthly EMI amount. The only downside here is that you will have to pay more interest but the move will help you repay your monthly dues with less difficulty, apart from reducing your EMI/NMI ratio. A lower EMI/NMI ratio will then favour you during the time of loan approval.

Also, credit card issuers offer periodic credit limit enhancement options depending on your card usage behaviour. If you get the option of increasing your credit limit, grab it with both hands.

Just keep your utilization ratio low (less than 30%) to have a positive impact on your credit score. If your utilization ratio is high, ensure that you are repaying your dues on time.

Think About A Healthy Credit Mix

Have a healthy mix of unsecured credit like credit cards/personal loans and secured loans like auto/home loans. Consumers with a higher number of credit accounts possess more credibility than those who are new/have less number of credit accounts.

Lenders and bureaus tend to trust applicants who have successfully handled various types of credit accounts. If you have only credit cards, try to get a low-cost credit-builder loan. If you have only loans/few credit cards, think about having a new credit card.

Avail Credit For Rent & Utility Payments

“Rent reporting services can add your on-time rent payments to your credit reports. Rent payments are not considered by every scoring model — VantageScores include them but FICO 8 does not, for example. Even so, if a would-be creditor looks at your reports, rent records will be there, and a long record of consistent payments can only help,” states NerdWallet.

“Experian Boost may also help. You link bank accounts to the free Boost service, which then scans for payments to streaming services, phone and utility bills as well as eligible rent payments. You choose which payments you want added to your Experian credit report. If a creditor pulls your FICO 8 using Experian data, you get the benefit of that additional payment history,” it adds further.

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