5 Practical Ways to Improve Your Credit Score

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I wonder how many of us know how important a credit score is. Truth be told, I didn’t have to think about my credit score before, even when I was applying for credit cards.

For those of you that are not aware of what a credit score is, a credit score determines one’s creditworthiness. Banks and other financial institutions look to your credit score to determine your eligibility for a loan or a credit card. Unfortunately, as a result of some bad financial decisions, some of us have low credit scores.

A low credit score can ruin your chances of getting a loan or a credit card and hence, it is very important to improve your credit score. You will find various articles online on how to improve your credit score but unfortunately, some of them are not exactly practical.

We are here to help you out, to tell you about the best practical ways to improve your credit score.

1. Establish a line of credit

What is worse than a bad credit score? A non existent one! Many of us believe that not having a credit history is better than having a poor credit history. While this might not be entirely wrong, it definitely isn’t true.

In order to have a credit score, it is important to build a credit history which can be done easily by applying for a credit card. Banks and financial institutions are quite reluctant to grant loans to a person who has no credit history. If you are one of those people who do not have a credit history, it is important to build one first.

Additional read: 5 Ways to Save on Your Credit Card Bill

2. Use balance transfer if you have too many unsecured credit lines

Balance transfer is a great way to get rid of your unsecured debt faster and ensure that you don’t miss payments on any of your credit lines. Missing payments, making late payments, etc. affect your credit score adversely. So, to improve your credit score, consolidate all your unsecured credit lines through balance transfer and make a single payment every month.

Additionally, you will enjoy low interest rates when you use this facility, it’s like hitting two birds with one stone!

Additional read: Ouch! What’s hurting my credit score?

3. Increase your credit limit to decrease your debt-to-income ratio

Applying for another credit card is not an ideal solution to manage your debt. Besides, you might not get approvals on any new credit lines if your TDSR (Total Debt Servicing Ratio) is skyrocketing. Instead, request your credit card issuer to extend your credit line, thereby successfully decreasing your debt-to-income ratio. As TDSR is a component to calculate your credit score, a decrease in your TDSR will lead to an increase in your credit score.

Additional read: Does your credit report confuse you? Let’s see if we can simplify it!

4. Curb any erratic credit behavior

As your credit report is a culmination of your credit activity, don’t make any sudden changes in your credit behavior. This includes sudden change in the amount you are paying each month, repeat late payments or setting a trend of missing payments. Credit score is not just about increasing it, it is also maintaining it.

So don’t shift from paying full outstanding payments to sticking to minimum payments. Also, don’t suddenly become a spendthrift if you have been frugal in your card usage previously. Restrict your mood swings to food and other non credit threatening activities.

Additional read: 6 Tips to Get out of Credit Card Debt Quickly

5. Establish a positive payment history

The best way to erase the bad is by doing good. It does not matter if you’ve faltered in the past with your financial decisions, you can always change it by making sure you do not repeat the same mistakes later. Start making payments on time and ensure you never miss a payment. This will build a positive credit history and in turn, bring your credit score up.

These are some of the very simple and practical methods that you can use to improve your credit score.

Keep reading the BankBazaar blog for more tips and clever hacks on all things personal finance related.


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