The credit score of an individual defines his ability to procure loans from banks and other financial institutions. Various factors affect the creditworthiness of an individual like past loan repayments, credit limit, and utilization, credit history, etc. A positive credit rating proves beneficial in the long term as the individual’s ability to take loans for personal and business purposes is enhanced exponentially. On the other hand, a low credit score can significantly reduce the chances of procuring loans and other forms of credit. Here are some tips on how to improve credit scores that can prove beneficial for individuals and their financial goals:
1. Timely payment of bills and repayment of credit:
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Individuals use credit for various purposes like grocery shopping, purchasing automobiles and residential properties, and business. They take personal and business loans which require timely payment of principal and interest amount. Therefore, one can significantly improve his credit score by paying credit bills, and monthly instalments on time without faltering. One can even set a reminder to ensure on-time payment of instalment amounts. However, in case of failure to pay the full amount on time, one can even repay small amounts to maintain their credit score.
2. Use of minimum credit for personal and business purposes:
Banks and financial institutions offered micro-loans for both personal and business purposes. Moreover, individuals opt for dedicated credit cards for their regular shopping and other essential needs. Out of the total credit limit available to an individual, the use of a small percentage can help in maintaining as well as improving the credit score. Individuals must therefore make sure to use their credit limit only when needed. Also, one can spread the overall credit use across multiple accounts for credit score maintenance.
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3. Analysis of credit reports:
Individuals can easily access their credit use reports from the dedicated banks or financial institutions where they procure loans. Timely review and reconciliation of all the entries in a credit report can help with the location of any issues or discrepancies. Moreover, any fraudulent activity is easily identifiable. This further can help improve the overall credit score.
4. Paying a greater amount than EMI:
One can significantly improve their credit score by paying more than the EMI amount regularly. Banks and financial institutions check the creditworthiness of an individual based on his ability to pay back their credit amount. If an individual pays back more amount than required under EMI then the credit score improves by numerous base points.
5. Opting for different forms of credit:
To improve credit scores, individuals must take different forms of loans or credit and ensure their timely payment. Taking both secured and unsecured loans and their repayment without any default improves the credit by an exponential rate. Moreover, despite the availability of proper cash flow, taking loans and making on-time payments can help increase the credit score.
Conclusion
Credit score maintenance and improvement are essential and require focus and consistent efforts. A high credit score opens doors to various opportunities for an individual who wishes to use credit for both personal and business purposes.