Best Tips to Increase Your Credit Score in 2022
A credit report contains all the information regarding your borrowings and repayments. Based on this information, your credit score is calculated. A good credit score is a sign of a healthy financial life. It is an indicator of how well you manage your credit. It also affects your overall credit report. That is why it becomes important to keep your credit report in good shape.
What is a Credit Report?
A credit report acts as proof of your creditworthiness. This makes acquiring loans or credit cards easier. With a good credit report, you can secure larger personal loans online at lower interest rates. It is an essential parameter that lenders consider to ascertain your repayment capability. A well-maintained credit report ensures that you can efficiently repay the borrowed money without defaulting. Some of the things that a credit report reflects include:
- Current debts: Whenever you apply for a new loan, the lender will check your current debts or obligations. This will help them determine your capacity to repay the loan. The lender will look at your FOIR, which must range between 30% and 50% to secure a higher loan amount conveniently at lower interest rates.
- Types of credit availed: Your credit report also reflects the variety of credit products you have availed of in the past. A good mix of credit products helps mitigate the risk of repayment failure and also helps improve your credit score.
- Past credit performance: Another thing your credit report reflects is how well you have managed your debts in the past. It shows if the EMIs have been paid on time. Or if there is a history of defaulting during paying debts. A good history of repaying debts helps increase the credit score and makes securing a personal loan online easier.
Importance of Credit Report
Maintaining a healthy credit report gives a borrower many benefits. It also makes the whole process of acquiring personal loans online more smooth and hassle-free. A good credit report can result in:
- Increased creditworthiness
- Higher amounts of loan
- Lower interest rates
- Quick approval of loan applications
A lot of factors can affect your credit report. One of them being your credit score. Factors ranging from your repayment history to your credit utilization have an impact on it. However, you don’t have to be worried if you have a low credit score. Some actions can help you optimize it. Let’s have a look at some tips and techniques to increase your credit score.
- Correct Errors in Your Credit Report
One way to find out where you need to work on your finances is by checking your credit score regularly. Review your credit report frequently. A lot of online portals let you check your credit report for free. Errors in the report can affect your credit score. Look for mistakes, and if you find any, raise a query with the bureau. Correcting errors can help improve your credit score.
- Paying Debts and Bills on Time
A lender will always check your relationship with your debts in the past. Whether you have paid your debts on time or not is also reflected in your credit report. Timely payment of debts and bills has a big impact on your credit score as well. It increases your creditworthiness, which helps when acquiring new loans. Hence, make sure you pay your credit card bills and other EMIs on time.
- Keep Your Older Credit Cards
Another element that your credit report includes is the duration of your credit history. It plays a key role in determining your credit score. A lengthy credit history of a borrower is proof of their reliability. Thus, keep your old credit cards active. An older credit card can indicate your ability to manage your finances. This will result in an improved credit score.
- Have a Mix of Credit Products
Keeping a diverse mix of credit products can help increase your CIBIL score. The diversity can be a mix of secured and unsecured loans, credit cards, and other lines of credit. Paying the bills on time and in full will result in an increase in your credit score. But make sure you have figured out a repayment plan before you take on more credit.
- Keep Your Credit Utilisation Low
It is best to keep your credit utilization as low as 30%. This shows that you are not completely dependent on credit. If you spend the majority of your money on credit, make sure to pay your bills on time. If you fail to do so, this will lower your credit score. Failure to repay the bills will also leave a negative impression on your credit report.
Maintaining a healthy credit report is highly important. A lender determines your credit history and creditworthiness based on it. Your credit report contains all your financial information. This information helps the lender calculate your credit score. A good credit score can pay off in various ways. You may get larger personal loans online at lower interest rates. Not only that, but it makes the whole process of acquiring a loan easier and quicker.
We have mentioned the ways you can improve your credit score and overall credit report. For more informative blogs and other tips, you can reach us at Piramal Finance. Our experts will guide you through your finance-related queries.
Also Read: Why is it Important to Increase Credit Score
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