A credit score is given to an individual based on their credit history and repayment habits. Ranging from 300 to 900, a high credit score indicates that you are a responsible borrower and pay your bills and EMIs on time. Everyone looks forward to having a credit score of 725 or above, as it makes availing credit easy when required. Having easier and faster access to loans can help in owning assets like home and fund expenses like wedding, vacation, travel, education, or medical emergency at the right time.
There can be numerous reasons why you may be stuck with a poor credit score, such as non-payment of credit card bills or final settlement or closure of a loan not reflected on your account. Check your credit score and know where you stand. If it is less than 725, the first question that comes to your mind is how much time it would take to improve your credit score. As the saying goes, “Rome was not built in a day”. The same applies to your credit score as well, as it’s not possible to rise it overnight. It requires persistent efforts and continuous responsible behavior with the credit to notice positive results.
The time taken to improve your credit score depends on how low it is and what efforts you are taking to get it right. Let us have a look at some examples of how soon you can improve your credit score that is low due to different reasons.
Missed or Delayed Payments
Missed or delayed EMI and credit card bill payments are the major reasons for low credit scores. If you have failed to make your payments regularly, you will end up with a low credit score for sure. In such a situation, you have to get back on track and start making your payments straight away as soon as you can afford them. You will need to make at least 3 consecutive payments on time to see some improvement in your credit score.
Most lenders have a particular schedule of sending reports to the credit bureaus, which usually ranges from 30 to 45 days. You have to wait for that time to see a change in your credit score.
High Credit Utilization Ratio
If your low credit score is due to high credit utilization ratio, then you must concentrate on reducing it first. Ideally, you should not use more than 30-40% of your total credit limit. Simple steps to reduce this ratio is to increase your credit limit and splitting your usage between multiple credit cards. If you keep your usage lower for 3-6 months, you may start seeing an improvement in your credit score over time.
Imbalanced Credit Profile
Lenders and credit bureaus perceive you as a responsible borrower if you have a healthy combination of secured and unsecured loans. If you only have unsecured credit in your credit profile, you are construed as a credit-hungry borrower. Credit bureaus do not view this kindly while calculating your credit score.
In order to improve your credit score, try to keep a balance between your secured and unsecured credit. You will see an improvement in your credit score as soon as you achieve a balanced mix of credit and stay consistent with the repayments.
Several Hard Inquiries
When you apply for a loan, the lender enquires about your credit history with the credit bureau, which appears on your credit report as a hard inquiry. If you apply for too many loans at a time, too many hard inquiries appear on your report, which ultimately impacts your credit score negatively.
To improve your credit score, in this case, stop applying for any more credit for at least one year. During this time, hard inquiries will become old and your credit score will start improving.
Errors in Credit Report
If your credit score is down due to errors in your credit report, identify the errors first, bring it to your lender’s or credit bureau’s notice, and request to fix it at the earliest. In such a case, your credit score will move up as soon as the credit bureau fixes the error from your report.
No Credit History
Most people who have just begun their career and those who have never taken a loan or used a credit card have no credit history. Such people have zero credit score and building credit history takes a few years before it reaches 725 or above. Apply for a credit card or a short-term loan and pay its bills and EMIs on time to start building your credit score.
Clix Capital allows you to check your credit score so that you can keep track of it and take the necessary steps whenever you see it dipping. We offer easy-to-avail personal loans, home loans, and business loans. So, take the time to improve your credit score and apply for the loan of your choice once you achieve the threshold of 725.
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