How to Improve Your Credit Score in 2021 ?

To be eligible to get a credit card, or a loan or any other credit product, you have to establish your eligibility by your credit score. Your past credit history, including the earlier availed credit and its repayment method, determines your credit scores. Higher the score better is your creditworthiness, while a lower score shows signs of poor creditworthiness.

In this blog, we shall discuss how to improve your credit score in 2021.

Lenders are normally cautious in approving loan applications with low score holders being indicators of risky borrowers.

Credit Score Range

In India, the Credit Information Bureau India Limited (CIBIL) gathers and preserves records of people’s payments relevant to credit cards and loans.

CIBIL score is the main aspect while availing of a loan, as lenders normally verify your credit score before come to a decision to lend not to you. CIBIL take into account several constraints before concluding the credit score.

The data taken by CIBIL, for calculating the credit score consists of features such as the credit cards you have taken, borrowings and your settlement records.

Another important criterion considered by the credit bureau is the amount of the credit used, delay in credit card payment, secured and unsecured loans secured by you. However, in the future, late insurance premium payment or mobile bill payment may also impact your credit score if included as parameters to arrive at the credit score.

CIBIL credit scores range between 300 and 900. A score above 750 is normally deemed to be good and is linked to a low risk of evasion, and are readily considered as loan customers.

How to Check Your Credit Score?

You can get your credit score checked at the CIBIL website by paying a nominal amount.

The procedure is rather simple; enter a few details on the CIBIL website, such as your PAN number, email ID, pin code and mobile number and your latest credit score is shown on the screen.

A credit score below 549 is treated as a bad score and so the chances of your getting a loan are pretty difficult. Do not despair; as we guide you to manage this situation in a systematic manner, resulting in improvement in your credit score rating quickly.

Where is a Credit Score Used ?

Everyone knows that money can buy almost anything. Unfortunately, everyone may not have that money to go about, however, there are diverse possibilities to earn or have access to money.

Banks are the biggest money lending institutions today, but borrowing money from them is not an easy task. All lending institutions look for the risk factor, before sanctioning money to the borrower, they follow certain criteria in evaluating the repayment ability of the borrower.

The criteria are dependent on the credit score of the borrower. The credit score is one of the important reckonings used by lenders to estimate the eligibility of the borrower.  Thus, it is vital for borrowers to rank a good credit score.

Benefits of a Good Credit Score

It is a common saying that people with a good credit score his credit or loan sanctioned easily. By sourcing in the market he is in a better position to get a better rate of interest, thus saving and large a large part of the loan amount. It is obvious that the borrower ensures that he approaches the lender with a good credit score rating.

How to Check Your Credit Score and Report ?

Anyone can check his creditworthiness by checking his credit scores by going through the detailed report of all his credit transactions. The credit report will give in detail about the loans or credit cards and about the delay in payments, if any, and conclude with the credit score.

How to Improve the Credit Score fast in 2021?

Check for Errors

If the borrower notices any error in the report, he can immediately take it up with CIBIL and the lender. Discuss with the officials and ensure to get the errors solved at the earliest. All disputes have to be rectified within a span of 30 days.

Credit Utilization Ratio

Keep a watch on the credit card used; use the card only for essential dealings. This way one can maintain the credit utilization ratio of less than 30%.  A low credit deployment indicates to the lenders that the borrower is credit judicious in utilizing the card, thus the credit ratio improves.

Fresh Credit Applications

If in the recent past, the loan or a credit card application has been rejected, then avoid applying for a fresh loan or other credit immediately. The best option is to hang around for some time till the credit score improves.

Keep away From Frequent Applications

Lenders normally check the credit report each time a person applies for a fresh loan; all such applications are recorded in the report. Frequent inquiries may have a negative impact on the credit score and would be assumed that the person does not have the ability to settle the debts on time.

Repayments on Time

To improve the credit score give preference to repaying the loan amount. If for some reason timely repayment is not possible, then the borrower should approach the lender for readjusting the repayment of the loan amount.  Possibly the lenders may consider such a request considering the financial trauma the borrower may be undergoing. Thus, the downgrading of the credit score can be saved than delaying the loan or interest payments.

Closure of Credit Accounts

A defaulting borrower normally approaches the bank to close the debt by lowering the full amount due. This act has to be avoided as it reflects in the credit report and hurts the credit score. Future lenders will reluctant to permit any further credit to such settled accounts.

Borrow when Needed

Frequent borrowings affect the credit score.  Borrow a loan only when it is crucial. Do not consume the total credit limit. Regularly monitor the expenses and income. Curb expenses by proper financial planning. Avoid superfluous credit.

Credit Mix

Go in for a mix of secured and unsecured loans. Like personal loans combined with home loans. Personal loans are unsecured loans. Banks do not appreciate borrowings more of unsecured loans and treat them as a negative indicator, possibly chances of declining future loan applications.

Conclusion

A poor credit score can harm your impending credit applications. A few months of tight credit control can improve the credit score fast in 2021.

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