Credit is very important in a person’s financial life. Credit score can be helpful in deciding the possibility of getting loans from various financial institutions for different purposes of one person’s needs. Most credit scores range from 300 to 850 points and they are based on the repayment history of the borrower and reflect his ability to repay debts in an orderly and timely manner. Belated or defaulted payments of instalments result in low credit scores.
There are well established and proven methods following which one can improve the credit score of a person who has a very low credit rating due to various reasons. Some of such techniques are explained below following which can help in improving his credit score without much delay.
Pay your bills on time
As everyone knows delayed or defaulted payment can act as a killer of the credit score. Practising a comprehensive system for credit reporting can be of very help in improving the low credit score of a person. Understand that an overdue payment can remain in your credit report for five years. So it will be better to set a calendar for all your payments and pay them on the due date itself, even if it causes some delays or inconvenience in some of your personal matters. Or you can also consider the direct debiting of the monthly payments from your salary accounts.
Do not accept credit cards without examining whether it is needed or not
Modern banks usually send credit cards to its customers showing their generous and helping nature. The amount of credit limit will be directly related to the monthly income of the credit card holder. But if someone accepts it, even if he does not need a new credit card at that time it will motivate him to purchase unnecessary things on credit and will be in trouble at the end. In practical life, credit cards often appear life a wolf in the disguise of a sheep. It seems to be calm and non aggressive in the beginning but turns out to be the real killer at the end.
Do not file more loan applications.
Often people go on filing applications for loans without knowing that the increased number of loan applications filed is also detrimental to good credit score. Some people have the habit of filing loan application in different banks for the same purpose. One should not do like that. If a person wants to take a bank loan think about the various options and discuss with the bank where he is going to apply. Only after knowing all the procedures and ascertaining his eligibility for the loan he intends to apply, he should apply for the loan with all the required documents and credentials so that there is no scope for rejection. In this way the number of applications can be reduced and this can help in improving the credit rating also.
Clear all the wrong information in your credit report
It has been found that there can be some wrong information in your credit reports which act as the reason for your low credit rating. At least one mistake is found in around 20-25% of credit reports. These mistakes can be wrong marking as late payment even if the payment was done on time, negative information not removed even after the period for removal is over etc. If such information is found in your credit report, this has to be disputed with the concerned credit bureau. They often respond and rectify the mistake within 30 days. Once they have cleared the mistakes keep a vigilant eye on negative reports and take care not to create any occasion for negative information.
Do not take any risks
One best way to improve credit score is not to engage in any risky activities like taking more cash advances and starting a pawnshop. Suddenly paying less amount and missing payments have to be avoided at any cost. Do not engage in any activities that can be risky to the present credit rating.
Always stay within your credit limits
Using credit limits in a just manner can always help you in minimizing the fall of the credit score. Spokesmen for credit counselling are of the opinion that credit has to be kept below 30% of the credit limits always for individual cards as well as for the overall card utilization so that any financial emergency can be met without any problem.