5 Ways To Improve And Build A Good Credit Score

• Check your credit score report regularly to ensure there are no erroneous entries
• Always make payments on time, whether it’s your loan EMIs or credit card bills
• Don’t make too many credit enquiries from different banks

One of the key things that can help you get a loan or credit easily is a good credit score. This score shows your financial health in terms of indebtedness and how efficiently and responsibly you are able to tackle it. A good credit score can help you negotiate with the lender for lower rates.

On the other hand, a bad credit score can affect your loan-taking capability in the future as lenders will consider you a high-risk borrower. Missed payments, active loan accounts that may have been paid off in the past or having no borrowing history at all are some of the factors that can lead to a bad credit score. Even too many enquiries about credit can affect your credit score.

The good news is that there are ways to improve your credit score to make the road ahead smoother for you.

Here are five things that can help you improve your credit score if you follow a disciplined approach.

Check Your Credit Score

It is important to check your credit score and look into the reasons why it’s low. Sometimes credit information companies make a mistake in recording your repayment behaviour. This could be because of misreporting by the lender or bank with which you are associated due to a technical or other glitch. Contact the credit information company and rectify any errors that you may notice.

If you notice other reasons for a bad credit score such as untimely repayment or making too many credit enquiries, rectify your behaviour and follow a disciplined approach.

Make Your Payments on Time

Making timely payments, whether it’s your equated monthly instalment (EMI) or credit card bill is crucial. Missed payments is one of the primary reasons that affects the credit score. So, the next time your credit card bill comes in, don’t just pay the minimum amount due but try and settle the full amount or at least as much as you can afford. Credit card dues can quickly spiral into huge debt traps if you are not careful.

Maintain Low Debt Utilization Rate

If you use credit cards, ensure you don’t exhaust the credit limit month after month. High utilization of credit is seen as risky behaviour. It goes without saying that you must spend what you can afford, to start with.

Often, one of the reasons for high utilization of the debt limit is revolving credit. Check each of your loan and credit card accounts and pay off as much as possible.

Also Read: 10 Ways to Improve Your CIBIL Score

Be Careful About Loan Enquiries

Sometimes when you are looking for a loan, you end up sending enquiries to multiple lenders. You may be doing so to be able to compare the interest rates and other terms and conditions, but this may not be taken too well by credit information companies who will see you as hungry for credit. If comparison is what you are looking for, you could visit aggregator websites that can show you deals and offers from multiple lenders at one place.

Build A Credit History

Credit information companies also look at past credit history or repayment and borrowing behaviour in the past to assign a credit score. Often, first-time borrowers face a challenging situation as they may not have taken any loans in the past. One of the ways to build your credit history is to take an asset-backed credit card (for instance, one that is backed by a fixed deposit) and make regular payments for a specific period of time. Once you are able to build an immaculate credit history, it will become easier to borrow the bigger loans.

Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code:-07730) and BSE Ltd (Member Code :103) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. ICICI Securities Ltd. acts as a referral agent to ICICI Bank Ltd., ICICI Home Finance Company Limited and various other banks / NBFC for personal finance, housing related services etc. & the loan facility is subjective to fulfilment of eligibility criteria, terms and conditions etc. The non-broking products / services like Mutual Funds, Insurance, FD/ Bonds, loans, PMS, Tax, Elocker, NPS, IPO, Research, Financial Learning etc. are not exchange traded products / services and all disputes with respect to the said referral / distribution activity would not have access to Exchange investor redressal or Arbitration mechanism.