#FinancialBytes: 5 simple ways to boost your credit score
It's extremely important to have a good credit score as it doesn't only affect your ability to take a loan or a credit card, but also influences the terms at which you may avail them. To put it simply, you may ignore your credit score but it will never leave you. Here are 5 simple ways using which you can improve your credit score.
First off, what is credit score and who gives it?
A credit score is a statistical number which reflects your ability to repay the borrowed money. It ranges from 300 to 900. The higher the credit score the better it is. In India, four agencies give credit scores, namely, CIBIL, HighMark, Equifax, and Experian.
#1: Use a maximum of 30% credit available to you
One of the important factors, which significantly affect your credit score, is your credit utilization ratio, i.e., the amount of credit that you use out of your total available credit. Ideally, your credit utilization ratio shouldn't be more than 30%. The easiest way to achieve it is by paying off the balances (in full) you owe on your credit cards, each month.
#2: Do not have outstanding balances on your credit cards
Another way using which you will improve your credit score is by paying off the outstanding balances on all your credit cards, even if the amount is small. This helps because these small outstanding balances on a number of credit cards cumulatively have a negative impact on your credit score. Further, it's advisable not to use more than 2-3 credit cards at a time.
#3: Don't take too many loans at the same time
To maintain a good credit score, avoid applying for too many loans or too many credit cards at the same time. This is because every time you apply for a credit, your credit score takes a hit, albeit small.
#4: Always pay your bills, and that too on time
One of the best ways in which you may improve your credit score is by paying all your bills/dues, and that too on time. Outstanding payments do not only include your dues on credit cards but also your rent, utility payments, and your post-paid mobile bill. To ensure timely payments, you may set payment reminders or choose automatic payment facility for your bank accounts.
#5: Do not close your old credit card accounts
Another important factor which affects your credit score is the age of your credit history. The longer your credit history's age, the better it is. To check the length of your credit history, some credit-score giving institutions consider the average age of all your credit card accounts, while some check the oldest opened account. So, it's always advisable to not close credit card accounts.
