Your credit score is the most important parameter which the lenders consider before approving a loan whether it is a debt consolidation loan or a mortgage.
The credit score range indirectly reveals to lenders about your ability to pay back credit or dues on time. You can check your credit score online that will give you a fair idea of your financial valuation in the eyes of a lender.
But sometimes an individual is not able to pay off dues on time, due to which the credit score can come down significantly. A bad credit score will fetch you a high rate of interest which obviously is undesirable.
If you have a bad credit score image, then the lender can turn down your credit requests which can be a bad thing in case you require funds urgently.
So, it is very crucial to take steps to improve your credit score.
6 Powerful Ways to Improve Your Credit Score from Low to High
Below are six ways by which you can improve your credit score.
1. Pay your bills before the due date
One of the most common reasons for a bad credit score is the late payment of dues. A late payment can cause your score to drop significantly.
When it comes to dues and EMI’s make sure that you pay them off before the due date. Untimely and late payment can impact your credit score and credit reports negatively for up to seven years.
In times of financial trouble, you can arrange for funds from your friends or family for a short period of time so that you do not default on your loans.
2. Time your Loan application carefully
Whenever you apply for a new home loan, personal loan, or auto loan, a hard inquiry is pulled out that has a detailed report of your credit history.
The fact that an inquiry lowers your credit score report temporarily should make you think twice before you file for a new loan application.
In general, a loan application lowers your credit score for a period of 6 to 12 months and that loan inquiry is present on your credit history report for a period of 24 months.
So, you should do thorough research on the eligibility conditions of a loan before you apply for it. After all, you don’t want to risk your credit score being lowered for a rejected application.
Also, you should refrain from applying for several credit cards within a short period of time.
3. Only Apply for Credit Cards When in Need
Credit cards have the power to boost your credit score, but that power is like a double-edged sword. A credit card can either increase your credit score or make a dent in your score if you delay your credit card dues.
So, it is all dependent upon your style of using your credit card that credit card will boost your credit score, or it will bring down your credit score. If you have a low credit score and do not have a credit card, it would be advisable to apply for a credit card.
4. Check for Any Discrepancies in Your Credit Report
It is a good habit to regularly check for any errors in your credit report.
It is a good idea to check credit score online and reviewing your credit report twice a year. This would help you to spot any errors in your credit report and will raise your credit score.
Sometimes some minor mistakes like name misspellings, duplicate accounts, incorrect accounts, incorrect payment status, outdated information can crop up that can ruin your credit report.
If you find any discrepancies in your credit report, make sure you notify the bank officials for the correction.
5. Increase your credit limit
Your credit card limit is the maximum amount of money that the lender can allow you to borrow from the credit card.
This limit plays a vital role in calculating the credit utilization ratio which is the relationship between the amount of credit borrowed to the total amount that is available to you.
This credit utilization ratio is very crucial that determines your credit score.
So, a hike in the credit limit directly translates to a higher credit score. However, you should not apply for an increase in the credit card limit if you have just received a new credit card.
Also, never make requests for an increase in the limit for multiple cards all at once.
You should be patient as credit card companies review accounts for customers regularly and if they find a satisfactory card usage, then the credit card limit is increased.
6. Spread your debts among different cards
The decision to divide your credit card dues among several credit cards can help you to raise your credit score if you clear payments of the credit cards on time.
But before you adopt this strategy make sure you do the math and calculate the total interest rate you will be paying as opposed to compared to the original debt.
By using the above-mentioned ways, you can improve your credit score range. A high credit score range at the right time will help you fetch a home loan, personal loan, or car loan at a low-interest rate.
However, you should keep in mind that an improvement in your credit score won’t happen overnight.
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Sneha Sharma is a writer currently associated with Droom Technology. She writes about various topics such as auto news, trends in the automobile industry, and auto finance.