How to improve low credit score:
A low credit score can make it difficult to get approved for loans and credit cards, often leading to higher interest rates and less favorable loan terms. However, with discipline, consistency, and the right strategies, it’s possible to improve your credit score, even with the support of the Reserve Bank of India (RBI) and some basic financial habits.
Credit scores range from 300 to 900, with different scores categorized as follows:
300-599: Poor
600-649: Average
650-749: Good
750-900: Excellent
A score below 600 is generally considered poor and may prevent you from securing loans on favorable terms. The RBI has recently introduced new rules that help borrowers rebuild their credit scores faster by ensuring data accuracy.
Several factors can lower your credit score, including:
Late payments: Missing bill payments or loan EMIs affects your score.
High credit utilization: Using too much of your available credit indicates over-reliance.
Multiple loan applications: Too many credit inquiries in a short period can harm your score.
1. Make Timely Payments
Always pay your bills, EMIs, and credit card bills on time. Consistency here is key to slowly rebuilding your credit profile.
2. Keep Credit Utilization Low
Try to keep your credit utilization ratio below 30%. Even if you clear your balance each month, ensure you’re not using more than 30% of your available credit.
3. Avoid Hard Inquiries
Refrain from applying for loans or credit cards unless absolutely necessary. Each application can reduce your score.
4. Maintain Older Accounts
Older accounts help improve your credit score by showing a history of reliable payments. Don’t close old credit cards or loans unless necessary.
5. Check Your Credit Report Regularly
Monitor your credit report for errors. If any inaccuracies are found, dispute them promptly. This can give a quick boost to your score.
6. Use a Mix of Credit Types
A combination of credit cards and loans, if managed well, can improve your creditworthiness.
With sustained effort and discipline, you may see improvements in your credit score within 4 to 8 months. Some people experience noticeable changes in just 6 months, especially when they regularly track and manage their credit activity.
Your credit score doesn’t have to remain low forever. With consistent efforts, smart financial practices, and RBI’s new policies, you can rebuild your credit score and put yourself on the path to financial success.
Disclaimer: Please consult a certified financial advisor before making any credit decision.
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