How do I increase my credit score?

The following is a rough estimate of a good, bad or poor credit score.

*The Scores and ratings above are as per Credit Score Range available in the Experian Credit Report.

If your credit score lies below 750, you probably need to improve it. Wondering why we think someone with a ‘Good’ credit score also needs to improve it? It’s because a good credit score can help you receive credit, but won’t get you the best deals.

A credit score is an important tool that helps banks and other lenders decide whether they want to take the risk of lending you money. It’s very simple, the lower risk lenders think you are, the lower interest rates they will offer. This means that someone with a ‘Good’ credit score might still receive a loan at a high-interest rate as compared to an individual with an ‘Excellent’ credit score.

The good news is, your credit score is dynamic. While someone with an ‘Excellent’ credit score needs to maintain it, someone with a ‘Very Low’ credit score can increase it.

Increasing Credit Score Vs Maintaining Credit Score

Increasing your credit score and maintaining your credit score are separate concepts even if they sound similar. Let’s understand the two in more detail:

Increasing Your Credit Score:

When you’re trying to increase your credit score, you will be required to plan with a focus on raising your credit score. This is usually done to access better credit opportunities.

Guide To Increasing Your Credit Score

1. Pay your bills on time:

Consistently making payments by their due dates demonstrates responsible financial behaviour and helps boost your credit score.

2. Reduce your credit utilization:

Keeping your credit card balances low in proportion to your credit limits can positively impact your credit score. Aim to use only a small portion of your available credit.

3. Manage your debt responsibly:

Maintaining a healthy mix of credit types (e.g., credit cards, secured and unsecured loans) and making regular, timely payments on existing debts can improve your creditworthiness.

4. Check your credit reports:

Regularly reviewing your credit report allows you to identify errors, inaccuracies, or potential issues that might be negatively impacting your score. You can dispute any errors to have them corrected.

5. Build a positive credit history:

Establishing a track record of responsible credit usage over time can improve your creditworthiness. This involves consistently meeting your financial obligations and keeping your debt in check. Ask for help if you’re struggling with excess debt.

Maintaining Your Credit Score:

Individuals who only need to maintain their credit score are those in the ‘Excellent’ credit score range. These individuals only need to keep up the good financial habits that have helped them get here.

Guide To Maintaining Your Credit Score

1. Continue paying bills on time:

Consistently meeting your payment deadlines is crucial for maintaining a good credit score. Late or missed payments can have a negative impact.

2. Avoid excessive debt:

Keep your credit card balances low and avoid taking on unnecessary debt. A high level of outstanding debt can negatively affect your credit score.

3. Regularly review your credit reports:

Stay vigilant and review your credit reports periodically to ensure accuracy and address any potential issues promptly.

4. Use credit responsibly:

Be mindful of your credit utilization and avoid opening unnecessary lines of credit. Only apply for new credit when needed.

5. Be cautious with credit inquiries:

Avoid excessive credit inquiries, as they can temporarily lower your credit score. Be selective and intentional when applying for new credit.

Thus, increasing your credit score involves taking deliberate steps to raise your score, while maintaining your credit score focuses on sustaining a good credit standing through responsible financial habits. Both aspects are important for achieving and preserving a healthy credit profile.