Low credit score? This is what you can do to improve it in next few months | Mint

If you have a poor credit score, say 650 or lower, it is not easy to procure a loan from a bank. And if you are lucky — the bank or a non banking financial corporation (NBFC) may charge a higher rate of interest for approving the loan.

Meanwhile, if you are planning to raise a large loan sometime next year or towards the end of this year, you may make a conscious attempt to push your credit score upward. There are certain tried and tested ways to improve your credit score. These include reducing credit utilisation, clearing off debt, taking a secured credit card and diversifying credit mix.

Here we list out the most effective and feasible steps to improve the credit score

Improving Credit score 7 key tips to follow

1. Check credit report: Get a free credit report from credit bureau such as CRIF High Mark. Identify errors or discrepancies and dispute them with the credit bureau.

2. Pay Your bills on time: Avoid late payments on credit cards, loans, and EMIs. You may set up auto-pay for timely payments.

3. Reduce credit utilisation: Keep your credit utilisation below 30% (i.e., use only ₹30,000 if your credit limit is ₹1,00,000). Pay off credit card dues before the due date to lower utilization.

4. Pay off outstanding debts: Clear any overdue loans or credit card bills first. If you have multiple debts, consider the snowball method (smallest first) or avalanche method (highest interest first).

5. Take a secured credit card: If you have a very low score, apply for a secured credit card against a fixed deposit (such as SBI Card, Axis Bank Insta Easy).

6. Diversify credit mix: Having a mix of secured loans (home/car loans) and unsecured loans (credit cards, personal loans) helps improve your score.

7. Avoid multiple credit applications: Frequent credit applications cause hard inquiries, lowering your score. If rejected for a loan, wait before reapplying.

(Note: Raising a loan comes with its own risks. So, due caution is advised)