A credit score is a 3-digit number that you get based on your credit history and repayment habits. Your credit score can have a significant impact on your chances of getting credit approval, whether you apply for a home loan, personal loan, SME loan or even a credit card. Lenders refer to your credit score to determine your creditworthiness and decide whether to reject or approve your loan and at what rate of interest. While a score of 725 is considered good, any score above that threshold can fetch you the most favourable loan terms and conditions.
With proper credit management, you can also earn a credit score of 725 or above. These are 5 tried and tested tricks that can get you a worthy credit score.
1. Make a Budget and Stick to It
If you want a credit score of 725 or above, you have to keep a balance between your income and expenses and keep your spending under limits. Depending on your income, make a budget and try to adjust all your expenses within that amount. Go through your past 3 months’ account statements and try to find out where you are spending unnecessarily. Are you spending too much on dine outs, movies, and other recreational activities? If yes, then it’s time to slow down and become responsible towards your financial management.
Calculate your total income and deduct your regular expenses from it. Depending on the amount left, make a budget to adjust your EMIs and other secondary expenses. That’s why it is important to apply for a loan amount that you can easily adjust in your monthly budget. Don’t go overboard, as repaying your EMIs may become tougher later.
2. Setup AutoPay
A major part of your credit score is calculated based on your credit card bill and loan EMI repayments. Regular payments boost your credit score, while delaying or missing them may reduce it.
If you are paying too many EMIs within a month or you are using several credit cards, it’s easy to forget paying some of them. So, one of the best tricks is to setup AutoPay. When you do this, your due amount is automatically reduced from your savings account on a fixed date. However, you need to maintain a balance in your account to enable automatic payment. As long as you are regular with your payments, your credit score will keep moving in the upward direction.
3. Minimise Your Credit Utilisation Ratio
Just because your credit card company has offered you a high credit limit does not imply that you must utilise it all. Ideally, you should not use more than 30-40% of your available credit limit. Keeping your credit utilisation ratio lower than that can get achieve a credit score above 725 quicker.
Retaining your old accounts, even if you are not using them anymore, is also a smart way to maximise your credit limit so that you can spend more while keeping your credit utilisation low. Take a credit limit increase whenever it is offered to you, as it also allows you to make your expenses without increasing your credit utilisation ratio.
4. Diversify Your Credit Profile
Lenders want to see how well you are managing different types of loans responsibly. So, the more diverse types of credit you have, the more credit score you will achieve. The best trick is to diversify your credit profile by taking different forms of credit, including long-term loans, short-term loans, secured loans, unsecured loans, mortgage loans, and others.
5. Stay Consistent
Remember, following these tips to increase your credit score just before applying for a loan will not work in your favour. You have to stay consistent with your payments, maintain all accounts with financial responsibility, and maintain a low credit utilisation ratio for the long-term to get the score required. Check your credit score now. Monitor your progress to ensure that you are on the right track to get a credit score above 725.
Clix Capital is a reputed NBFC that offers a varied range of loans for individuals as well as business customers. We have easy application and fast approval procedures that any eligible borrower can benefit from!
You can also reach out to us at firstname.lastname@example.org or call us at 1800 200 9898