How to improve your credit score?

Credit score is the single most important thing when it comes to taking a loan, applying for a credit card or getting low interest rates. In short, your financial life revolves around your credit score. A “good” credit score can be a boon to your financial life and can carve a really easy path for you whenever you are in need of finance.  a bad credit score is definitely a  killjoy. Now that we are talking about credit score, let’s start with the basics:

What is “credit score”?

Credit score is basically a number that determines a person’s trustworthiness as a customer taking credit from the bank. It is a three digit number between 300 to 900. The higher the number, the more an individual’s credit worthiness. Credit score is the key factor that helps in determining if you will get a loan or not. 

Before you check your credit score, there are a few things you need to keep in mind. The most important one is to make sure what kind of a check you are about to perform. Not making much sense? We will shed some light on it for you. 

The Art of Hard vs. Soft pull

There are two kinds of checks that you can perform on your credit score. One won’t affect the score in any way, while the other one can push it further down the alley. What kind of check can lead to a dip in your credit score while which is the “sweeter” one? Let’s talk a bit about both:

Soft pull: A soft pull is something you can do by yourself to check your score. It is safe and doesn’t have any negative implication. This is the kind of pull banks don’t do, when checking whether to give you a loan or not.

Hard pull:  A hard pull happens between the lender and credit score agency. When you apply for a loan, the bank goes to a credit bureau to check your credit history. That is a hard pull.  A hard pull lessens your score and a low score can lead to further difficulties in the loan-approval process. 

We suggest you ask for a hard pull only after you’ve done your research. Imagine, you have done a credit score check and hurray! if you have got good results(pats your back). But what if you have got a bad result? No, we don’t wish you a bad score! We are just asking you to be open to the possibility of a bad score.

Nobody likes thinking about a poor credit score, but what if your report tells you that you have just got one? Not many people will comment on the “why did I get this?” of the poor result and the “what” of how to improve it. It’s like you have been diagnosed with an ailment but when the time for recovery comes, nobody wants to prescribe you any meds. Frustrating, right? Can we help you by taking a bit of that frustration away by answering the ”why did I get this!” bit for you? Here goes:

Why that poor credit score?

One of the saddest things that you will ever read in life is “poor credit score”. Trying to understand what can lead someone to this devastating answer(and outcome)? Some possible explanations of that meager score could be:

• Going into Default zone: For the love of whatever you believe in, please pay your loan payments on time. Don’t cry later when your credit score is hanging out at the rock bottom. No default, No worries, No dip in credit score – life sorted! 
• Imbalanced spending/credit limit: The expenses to credit limit ratio should be below 30-35%. A ratio higher than this  means that you are being impulsive and irresponsible with your spending. Keep the ratio low. It signifies your responsible borrowing etiquette and makes the banks go gaga over you.
  
• Don’t pull too hard: Yep, too many hard pulls under your name means that you can happily assume that your credit score is getting beaten to death. In short, it declines so avoid hard pulls as much as you can. Go soft on your credit score inquiry.
• Stay out of bankruptcy: This one is a no-brainer, of course. Why would anyone want to give you more money when you are already drowning in debt and moneyless-ness!  ¯\_(ツ)_/¯Now that we have pointed out the obvious issues that can lead to a dip in the score, how the heck can you touch the ceiling on the credit score scale. Here’s how:

Hitting the high credit score scale

It can take about 30-90 days for your credit score to show any change even after keeping good money habits. Remember, slow and steady wins the race? Cliched as it may be, the pasta cooks so much better when you let it cook slowly(and there is no other way) Spare the food specimen, but we hope you get the picture.

Some tips to give your credit score wings:

• Drop the irregular act: Nothing cool about missing payments. Be loyal and consistent in your payments and pay all your EMIs on time.
  
• Don’t exploit those credit cards: Use credit cards in moderation and pay them off on time. Don’t get ahead of yourself and exceed the credit limit. Practice safe credit habits.
• The more, the merrier: A good way to ensure that your credit score rises is to have multiple cards and pay all their EMIs on time. This is a good way to expand your credit limit as well. 

We hope the points above give you enough understanding on how to improve your credit score. Simple and easy to do – please make sure that you take the points above, straight to your heart and “actually” make your credit score touch the roof!