Here’s your essential checklist for improving credit score

A good credit score is your pass to an easy and smooth loan disbursals and availing many other financial instruments. The criteria to get a loan depend on multiple factors including the size of the loan, the tenure it is required for and other background checks. However, almost every lender in the organised sector verifies the borrowers' credit scores to ascertain their creditworthiness.

The higher the score, the easier it is to get the new loan or credit line approved. Further, a good credit score can also help you get lower interest rates on your borrowings.

In India, most banks depend on rating by CIBIL, a credit rating agency to verify a borrower’s history and worthiness.

A CIBIL score of 750 is considered good and anything lower than that may cause trouble in getting loans approved.

If you are also stuck with an average or low credit rating, here are a few key tips to improve your credit score.

Review credit score

To solve a problem, you need to find the root cause of it. So, before you start working in the direction of improving it, ascertain what's causing the lower credit score. Delayed repayment, high credit card pending balance, and not having a diversified credit mix contribute to low credit scores. Keep checking your credit or CIBIL score regularly to keep track of your creditworthiness.

Financial discipline

Paying your dues on time can help you boost your credit score. So, if you are someone who misses the deadline on repayments, things need to change. Late payment of EMIs or credit card bills doesn't only bring penalties but also lowers your credit score. Opt for services that let you automate bill payments to avoid missing deadlines.

Don’t get overboard

Too much of anything is not good and so is the case with borrowing money. Use your credit limit judiciously and avoid taking multiple debts at a time. To maintain a healthy credit score, settle your existing loan before applying for a new one. Applying for multiple loans during the same tenure can bring down your credit score. Multiple loans are seen as an indicator that you have insufficient funds and are caught in a loan trap. This further leads to a drop in your credit score.

Get the right mix

To have a healthy credit score don't put all your eggs in one basket. Maintain a healthy mix of secure and unsecured loans of long and short tenure to build a good credit score. Having many unsecured loans like personal loans and credit cards is seen negatively and gives an impression that you are always in a cash crunch.

Old is gold

Continue to maintain your old account and credit cards with timely payments to lengthen your credit history. A short credit history can lower your score.

Talk to expert

If you have tried everything in your reach to improve your credit score and still haven’t managed to improve it, it’s advisable to speak to experts or financial advisors. They will offer you personalised assistance to boost your credit score.

Please note that improving credit score can take time and hence it is important to be persistent with healthy financial practices.