5 easy ways to improve your credit score quickly

By Megha Bhattacharya

The three-digit credit score, usually ranging from 300 to 850, acts as an important measure of your financial health. It is a summary of various factors, such as credit repayment history, credit accounts, the total amount owed, credit tenures and credit utilization ratio. The score evaluates a borrower’s creditworthiness and suitability for credit offerings. A good credit score (ideal score being 700 above) opens the door for a variety of attractive credit products, along with better chances of loan approval at lower interest rates.

Here is a step-by-step guide to achieving a better credit score fast –

• Pay Your Bills on Time!

According to Experian, “When lenders review your credit report and request a credit score for you, they’re very interested in how reliably you pay your bills. That’s because past payment performance is usually considered a good predictor of future performance.”

The most important benefit of on-time bill payments is the impact on your credit scores. Delays in bill payments not only impose penalties but also lowers one’s credit score. To avoid late payments, users can create a filing system, either paper or digital, for keeping track of monthly bills, set due-date alerts and automate bill payments from their bank accounts. So, if you are planning for a loan or a major purchase, the best tip will be to not delay your payments.

• Check for Credit Report Errors

Inaccuracies in credit reports can affect your credit scores negatively. Users should corroborate accounts with their reports and dispute any noticeable errors to the respective credit bureau for further investigation. Common credit report errors include accounts or loans that have been paid off but appear as unpaid, individual loans listed multiple times, and debts that are incorrectly reported in collections.

Complaints about credit reports accounted for more than 50 per cent of all consumer complaints to the Consumer Financial Protection Bureau (CFPB) in 2020.

• Decrease Credit Utilization Ratio

Lenders prefer low ratios of 30% or less, and people with the best credit scores often have very low credit utilization ratios. Credit utilization rate, sometimes called the credit utilization ratio, is the amount of revolving credit you are currently using divided by the total amount of revolving credit you have available. A low credit utilization ratio tells lenders you have not maxed out your credit cards and likely know how to manage credit well. The credit utilization ratio can be reduced with the help of on-time debt payments as well as with
the addition of new cards to increase the credit limit.

• Keep Your Old Cards

Closing old accounts or unused credit accounts may increase the credit utilization ratio by lowering the total available credit. By keeping old accounts, users can benefit from longer average credit history and a larger amount of available credit. Credit scoring models often reward you for having long-standing credit accounts, and for using only a small portion of your credit limit.

• Have a Healthy Credit Mix

A credit mix refers to the multiple types of loan accounts held, such as credit cards, student loans, mortgages, and car loans. Credit mix determines 10% of one’s FICO credit score. Credit scores take credit mixes into account to establish a more comprehensive profile regarding your payment history, trustworthiness, and ability to successfully manage different types of credit.

It is best to have a mix of instalment accounts — those with a set number of equal payments, such as car payments or mortgages — and credit card accounts. Users are entitled to free credit score reports from three major credit bureau agencies (Experian, Equifax and TransUnion).

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