If you have an overdue check your credit health for free, missed a loan EMI, or have high credit card balances, then chances are that your credit score is below average or even poor. A poor credit score makes it difficult to secure loans and credit cards. Even if you’re approved for a personal loan, home loan or car loan, you will have to pay a higher interest rate due to your low CIBIL™ score.
The good news is that – just because your credit score is poor now, it doesn’t have to remain like that forever. With the right strategies, you can repair your credit score all by yourself. It just requires a bit of patience and proper credit-building techniques.
Step 1: Get the Latest Copy of your Credit Report and Credit Score
To fix your credit, you need to first know what’s broken. This begins with getting a copy of your credit report. In India, credit reports and scores are generated by the four major credit bureaus:
- TransUnion CIBIL™
- Experian and
- CRIF High Mark
You can receive a free copy of your credit report and credit score once every year from a credit bureau of your choice. Post that, you will have to pay for additional credit reports. Alternatively, you can check your credit health for free any number of times at trusted sites like CreditMantri. Besides giving your credit score, CreditMantri also provides you with a free credit health assessment.
What information is present on your credit report?
Once you have your credit report in hand, you need to know what to look for. Your credit report starts with your personal details – full name, gender, date of birth, current address and so on.
Once you scroll through the personal details, you get to the section containing each of your credit account details. It includes account age, the total number of payments made, delayed/missed payments, and other related information. Your credit score is calculated based on your payment history, account age, credit type, credit utilisation and credit inquiries.
Step 2: Search for any Errors and Fix Them
Credit mistakes made by you cost you. Similarly, mistakes made by the credit bureau or the lender also costs you. However, the good news here is that the bureau or lender’s errors can be fixed quickly. If you notice any mistake on your credit report, you have two options before you:
- Generate a credit dispute with the credit bureau. You can do this online, by email or via phone.
- Alternatively, you can hire a credit counseling agency like CreditMantri to fix the error on your behalf.
Minor errors like corrections in your personal details or reporting inaccurate payment information can be handled by yourself. However, if you’ve been a victim of a major fraud like identity theft, seeking the help of a professional is recommended.
Can I increase my credit score in 30 days?
Yes, it’s possible if your low credit score is due to an error made by the bureau or the lender. Credit bureaus must respond to customer disputes within 30 days. They have to investigate the complaint and remove the erroneous information quickly. So, if you report a genuine error, then you can see your credit score increase immediately after the error has been fixed.
Step 3: Inculcate Credit Positive Habits
Once you have fixed your credit report’s errors, it’s time to roll up your sleeves and get down to building a healthy credit account. Here are a few tips to keep in brain:
- Pay all your credit card bills and loan EMIs on time and in full going forward. 35% of your credit score depends on your payment history. Even a single late or missed payment can cause your credit score to drop significantly. Also, remember that late payments stay on your credit report for seven years. So, it pays to be cautious and stay on top of your repayment schedule.
- Credit mix (a mix of both secured and unsecured credit) is another factor that influences your credit score. It accounts for 10% of your credit score. Wondering why? This is because lenders prefer individuals who can handle both types of credit accounts responsibly. Try to include secured loans like home loans, car loans, unsecured credit like personal loans, and credit card in your credit profile.
- Finally, do not apply for several credits in a short span. This is because every time you apply for credit, the lender dings up your profile. This leads to a hard inquiry, and multiple hard inquiries can cause your credit score to drop within a short time. Instead, use loan and credit card aggregators like CreditMantri to shop around for the best rates and apply for a loan or credit card only when you get a good deal.
Step 4: Keep Credit Utilisation in Check
The credit utilization ratio is another factor that plays a crucial role in determining your credit score. It’s the rate of credit used to the total available credit limit. Aim to keep your credit utilization rate below 30%.
Let’s say you own only one credit card with a limit of Rs. 1 lakh. Ensure that the balance on your card doesn’t go over Rs. 30,000 at any time. This keeps your credit utilisation rate low, which, in turn, can boost your credit score. Even if you go above the Rs. 30,000 limit, ensure that you repay the balance as quickly as possible to ensure that it’s not reported to the credit bureaus.
Step 5: Keep Old Credit Cards Open
Old credit cards that have a good credit history look great on your credit report and boost your credit score. 15% of your credit score depends on the average age of your credit accounts. Having an old credit card open increases your credit profile’s average age, which in turn improves your credit score.
If you’re new to the world of credit, then apply for a secured credit card and start using it to build your credit history. Alternatively, small credit builder loans also help in making your credit history.
Your credit score plays a crucial role in impacting your finances. It not only helps you secure loans and credit cards but reduces your interests as well. Thankfully, you can take the proper steps to fix your credit score. Use the steps listed here to build and improve your credit score by yourself.
If you would like professional help, you can always get the service of trusted professionals like CreditMantri. The experts at CreditMantri can help you resolve the issues on your credit report and get you back on track.
Finally, don’t forget to keep track of your credit score periodically after you’ve reached your goal. Monitoring your credit score periodically will help you identify and troubleshoot issues before they cause further damage to your credit score. With CreditMantri’s free credit score check tool, you can check your credit score any number of times. You can also sign up to receive the latest copy of your credit report.