5 ways to improve your credit score in 30 days
1. Timely Payments
Making payments on time is crucial for maintaining a healthy credit score. Bounced EMIs and missed payments can negatively impact your credit score.On the other hand, making payments promptly not only maintains a positive relationship with the lender but also improves your credit score. Timely payments are not only good for your credit but also a good financial practice.
2. Acquiring a Credit Card
Obtaining a credit card helps in building a credit history. Lenders value borrowers with a longer credit history as it enables them to assess creditworthiness. Credit cards can also provide interest-free credit for a short period, aiding your urgent financial needs.
3. Maintaining a Low Credit Utilization Ratio
To boost your credit score, it is essential to keep your credit utilization ratio under 30%. This is a highly effective method to enhance your credit score in the short term. For example, if your credit limit is Rs 2 lakh, avoid spending more than Rs 60,000. This responsible management will contribute to improving your credit score.
4. Requesting a Higher Credit Limit
Seeking a higher credit limit from your existing lender demonstrates your responsibility as a borrower. Factors such as maintaining a credit utilization ratio below 30% and consistently paying bills on time will increase your chances of securing a higher credit limit.
5. Opting for a Cash-Backed Credit Card
Choosing a cash-backed credit card, secured by a fixed deposit, can expedite the improvement of your credit score. With this type of card, you are typically required to deposit an amount equal to your credit limit, providing a guarantee of repayment.
Please note that improving your credit score is an ongoing process that requires the development of sound financial habits.
Frequently Asked Questions (FAQs)
How can I quickly boost my credit score?
To enhance your credit score, make timely payments, maintain a low credit utilization ratio (below 30%), consider getting a credit card, request a higher credit limit, and explore cash-backed credit cards.
What is the significance of a good credit score when applying for a loan?
Your credit score directly affects loan approval. A good credit score improves your chances of loan acceptance, while a poor score can lead to rejection by lenders.
What is the difference between a soft inquiry and a hard inquiry on my credit report?
When you check your own credit score, it’s a soft inquiry. Employers and others checking your credit also fall under this category. A hard inquiry is made by a lender before approving a loan.
How can I establish a credit history?
Acquiring a credit card is an effective way to start building your credit history. Lenders value a longer credit history as it helps them assess your creditworthiness.
What is a cash-backed credit card, and how does it improve my credit score?
A cash-backed credit card, secured by a fixed deposit, requires an upfront deposit equal to your credit limit. This deposit serves as a guarantee of repayment, which can expedite the improvement of your credit score.