If you’re concerned about your credit score, you’re not alone! A poor credit score can negatively impact your ability to get approved for loans and other financing options in the future, not to mention the amount of interest rates you’ll be required to pay if you do manage to get approved.
You must be thinking what are the disadvantages of a bad credit score. Have a look at this infographics:
If you want to improve your credit score and avoid dealing with high-interest rate loans and loans that don’t go through, keep reading and we’ll show you 9 easy ways to improve your credit score in India.
1) Pay all bills on time
Paying your bills on time is crucial for all kinds of credit, not just loans. It’s an excellent way to demonstrate responsible money management skills, which are essential for obtaining a good credit score. Your payment history makes up 35% of your FICO score, so it can have a big impact on your future financial life. If you have only one thing on your agenda today, pay at least one bill on time and don’t miss another due date until year-end.
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2) Avoid applying for new loans
When we want to take out a loan, we try and improve our credit scores. But, contrary to popular belief, taking out new loans (especially before paying off existing ones) can lower your credit score and make you appear less responsible.
If you’re applying for a home or car loan, apply before shopping around; doing so will show lenders that you’re responsible enough for multiple loans and won’t deplete all of your borrowing power immediately. If you already have multiple loans, avoid applying for more until you pay off some of them—otherwise, it can look like financial irresponsibility.
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3) Reduce debt burden
Debt is anything that costs you money. There are two types of debt: good and bad. Good debt is used for investments such as college education, a car, home, or business startup costs. Bad debt generally refers to revolving debts like credit cards and personal loans; they often come with variable interest rates and fees which can hurt your overall FICO scores.
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To improve your score quickly, make a commitment to reduce unnecessary expenses and pay off more of your existing loans. Over time, these steps will lead to better FICO scores and help you qualify for better rates on loans (and hopefully lower monthly payments).
If you don’t know where to start or what steps might work best for you, I’d recommend slice. With the slice super card, you can convert your debt to No Cost EMIs easily.
4) Avoid applying for new credit cards
If you’re already saddled with a high level of debt, it can be tempting to apply for new cards and balance transfer offers to help reduce your monthly payments. However, applying for new credit cards only worsens your situation.
Your chances of being approved for a new card are extremely low if you already have multiple lines of open credit – especially if you’re approaching or at your limit on existing cards. Your best bet is to focus on paying down existing balances and then trying again later in order to improve that all-important number: your FICO score.
Instead, it may be a smarter move to use just one credit card which offers maximum benefits. The slice super card, for example, offers various benefits and deals on online & offline shopping, making it perfect for all your requirements.
5) Don’t take more than 50% of total available credit limits
If you take more than 50% of total available credit limits, it will negatively impact your overall credit score. It makes sense; if you’re using close to or more than half of all available loan and credit lines, it indicates that you’re overextending yourself and may not be able to maintain payments on loans and credit cards for very long.
If anything goes wrong, such as a job loss or an emergency, you may find yourself unable to pay back loans and could ultimately find yourself in debt or out on the street. This can be an especially detrimental practice if done frequently, as it indicates a complete lack of financial responsibility.
To improve your overall credit score, avoid maxing out any of your loan and/or credit cards at all times.
6) Avoid opening too many bank accounts in a short period
If you’re planning on applying for a loan or credit card, there are multiple accounts linked to your name—and lenders pay close attention to that. Having too many accounts open simultaneously can have a negative impact on your credit score.
Keep it simple and only apply for one card or loan at a time if possible. You can even go a step further and call each of your providers before applying, letting them know that you will be opening an account with them soon. slice offers you the option of an EMI without a credit card and there is no need of having a physical credit card with you.
7) Stay on top of your debts and payments
If you’re already in debt, stay on top of it. Pay at least enough that you won’t get charged any late fees and don’t let any accounts fall more than 30 days past due.
If you know your credit scores are less than stellar, set up payment reminders with yourself or others so they make sure bills are paid on time. This will help minimize how much is sent to collections when you do need a quick cash infusion.
8) Maintain a good mix of different kinds of loans
Your overall debt-to-income ratio—that is, your total debt as a percentage of your income—is likely one of those factors that matters most. You can control that part by limiting how much you take on in other kinds of debt besides mortgages.
For example, if you have a home loan and a car loan and a student loan, try not to make any new purchases with plastic until at least one of those loans is paid off. A good rule of thumb: Your monthly payments on non mortgage debt should be no more than about 10% of what you make each month. If they’re higher than that, consider paying down some debt or looking for ways to boost income before taking on any more borrowing.
9) Document all financial transactions
This is one of those pieces of advice you hear all the time, but it’s true. If you aren’t doing so already, track every expense on a spreadsheet. It doesn’t have to be fancy or complex; it just needs to capture who paid you money and what they paid for (and how much they paid).
Those entries will let you see exactly how much cash is coming in and out of your business. Additionally, if you apply for a small-business loan or line of credit at some point down the road, it will help prove that things are legitimate. Documenting everything helps with consistency. The slice app, for instance, lets you see all your debits and credits easily at a single place.
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