How to improve your credit score?

Credit score | Sep 17, 2020 | 10 min read

A credit score determines your financial health. It depicts your creditworthiness based on your credit history. The score works as a measure for lenders such as banks and housing finance companies, to decide whether or not to offer a loan to the person. It also determines the terms of the offer. 

In India, there are four Credit Information Companies that can determine the creditworthiness of an individual. According to the mandate issued by the Reserve Bank of India on how the credit distribution has to be created, a credit score ranges between 300 and 900. A good score is above 750, and anything lower than that needs to be improved. It is easy to improve your credit score, but it takes a little effort and time. Here are some of the measures that you can take to improve your credit score.

1. Timely payment of dues

Making timely payments is the most significant contributing factor for higher credit scores- be it credit card payments or EMIs. Payment delays not only lead to paying of penalty but also reduce the credit score. So set reminders for all your credit card bill payments or better, still automate them for it to work seamlessly without any probability of a delay. For your loan EMI payments, you can use E – NACH such that the amount is auto-debited from your account every month.

2. Reducing debt

Use your debt prudently and avoid taking too much debt at one time. Apply for only one loan at once. Only after repaying one loan should you apply for more credit if required. For a bank, anybody applying for multiple loans simultaneously shows that you are in an unending cycle of loans with insufficient funds. This will reduce your credit score even more.

3. Maintain a healthy credit mix

Paying off a combination of loans is also a great way to improve your credit score as it shows that you do not have too much burden of a particular type of loan. Regular payment of an unsecured loan and planned credit card payments or a combination of credit card payments with EMIs on a secured loan instills confidence in the bank with regard to your ability to manage money. In fact, banks check the fixed obligation to income ratio to know your capacity to pay debts.

4. Check your credit report

Increasing your credit limit for particular credit cards does not mean you have more money to splurge now. On the other hand, it means that you have more credit at your disposal but show an increase in the credit limit in the credit report. If you maintain the same credit utilization as before and it would reflect positively in your credit report. This one way to enhance your creditworthiness.

5. Increase your credit limit but reduce the utilization

Increasing your credit limit for particular credit cards does not mean that you have more money to splurge now. On the other hand, it means that you have more credit at your disposal but just to show an increase in the credit limit in the credit report. If you maintain the same credit utilization as before and it would reflect positively in your credit report. This one way to enhance your creditworthiness.

6. Joint account and guarantors

If you have joint, co-signed, and guaranteed accounts, you are held liable even if your joint account holder falters in payment. It reflects in your credit report. This kind of negligence can affect your ability to get a loan when needed. Thus, it is best to avoid being a joint account holder or guarantor of loans.

7. Company credit cards

A company credit card is issued to an individual based on their credit score. In this case, since the credit card belongs to the company, it is essential to keep a tab that the credit card dues are paid in full before the due date by the company since it affects the credit score of the holder.

A higher credit score shows that you have disciplined spending habits and regular repayment capabilities. This makes the creditors more confident of repayment of the loan, which in turn gives a higher credit score on better terms. You can always connect with HomeCapital, the first home down payment assistance program in India, for the initial down payment requirements while purchasing your first house.

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The HomeCapital "Portal" and all its contents are only for the purpose of providing information regarding the HomeCapital Down Payment Assistance Program and should not be construed as binding. By using this website, you accept our Terms of Use and Privacy Policy. We are not a lending institution. All loans are made by our financial institution partners. The real estate properties listed on the Portal are not an advertisement or a solicitation and the customer shall independently review and verify the credentials of the project and/or the developer.

HCPL and it's partners reserve the right to reject any application at any time in accordance to its policies. To qualify, a borrower must be a Indian citizen and meet our financial partners underwriting requirements. To check for an applicant’s eligibility, our lending partner will request your full credit report from one or more credit bureaus. Not all applicants receive the down payment assistance. To qualify for the program, you must have a responsible financial history and meet other conditions. Assistance limits displayed are indicative, actual limits will depend on number of factors. If approved, your program assistance tenure will depend on a variety of factors, including down payment assistance amount, repayment capacity, a responsible financial history, years of experience, income, home-loan to value ratio and other factors.

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