The value of having a high credit score is indispensable when it comes to availing a loan approval. The higher is an intending borrower’s credit score, the better is their scope of availing a loan from the borrower. Most lenders choose to offer the loan to a borrower whose credit score is high; it becomes essential for a loan applicant to increase their credit score as much as possible.
How to increase credit score?
A lot of factors tend to play an influential role on a borrower’s credit score. A score ranging from 750-900 is deemed excellent and is looked at as an ideal score to avail quick loan approval.
But before a borrower considers how to increase credit score, they should first become aware of their existing credit score by running a quick check online.
The following highlights how you can use a credit card to improve your credit score –
- Paying bills on time: A borrower’s payment history is proof of how well they can pay off their debt. Having a diligent payment record tends to influence a borrower’s credit score in a positive way. Borrowers should make an attempt to clear their credit card bills, loans and dues on time to avoid ‘negative information’ on their credit report for a term of seven years.
- Restrict the need for opening new credit accounts: Contrary to popular beliefs, opening a new account to create a better credit mix does little to improve a borrower’s credit score. In fact, some look at it as potential harm on credit score. Piling on new credit accounts creates ‘hard inquiry’ on borrowers’ credit report, and it also increases the temptation to overspend, resulting in additional debt.
The Bajaj Finserv RBL Bank SuperCard is one such credit cards that offer galore of facilities to the cardholders that do not give rise to the need to open a new credit account. Also, cardholders can avail interest-free ATM cash withdrawal up to 90 days.
They also provide pre-approved offers to simplify the process to avail these cards and to reduce the time required. These offers are valid on a plethora of financial products and services including home loans, business loans, personal loans and more. You can check out your pre-approved offer by providing a few necessary details.
- Clear debts and maintain low balances on credit cards: Besides clearing outstanding dues, a cardholder should also try to maintain a low balance on their credit card to enhance their credit score and credit utilisation ratio. Both credit score and credit utilisation ratio (current debt divided by credit limit) is vital when it comes to availing a loan. A low credit utilisation ratio indicates that the borrower has not maxed out their credit card yet and is equipped at managing their credit in a better way.
- Factor in utility payments: Using a credit card to pay off utility bills is looked at as an effective way of enhancing one’s credit history. Since the debt incurred through utility expenses is lighter than most debt, it allows borrowers to pay them off quickly With Bajaj credit card payment option; cardholders will be able to build a positive credit record and enhance their credit score.
- Maintaining unused credit cards: If your unused credit card is not costing you in terms of annual fees, you may want to hold on to it. Closing a credit account may increase one’s credit utilisation ratio but then owing the same amount, but under fewer open accounts may lower their credit score.
Besides these, making cash purchases instead of paying for things on credit will also serve as a potent answer for how to increase credit score. Through timely repayment of debt and handling cash and credit transactions responsibly, borrowers can enhance their credit score. Know how to choose the right credit card for yourself and apply for its straightaway.