2019 goals: Let’s improve your credit score now

While a bad credit score may lead to a rejection of your loan application, a good one can help you access higher loan amounts at lower interest rates. So, you can include improving your credit score as one of your New Year resolutions for 2019.

Your credit score encompasses your credit history and financial behaviour in a nutshell. Whether you are a good borrower who repays debts on time or whether you are struggling with your EMI payments, your credit report reveals it all. Right from your loan applications to your late EMI payments to your outstanding debt, everything is mentioned in your credit report and is represented by your credit score.
To stay financially prepared for the future and avail credit when you need it without paying a heavy price for it, work on improving your credit score. Here are easy ways to successfully follow this New Year resolution for 2019.

TAKE STOCK OF CREDIT SCORE
Have you recently checked your credit score? Don’t wait till you’re applying for a loan or credit card to find out your score. Do it today, at no cost. Just Google for “free credit report” and get yours in a few minutes. Go through your report to see what your score is, as well as to understand how it has been computed. If your score is low, you will instantly know what has contributed to it — late payments, defaults, etc. However, if you think any incorrect information (such as being assigned an incorrect PAN number) is hurting your score, you should take immediate steps towards reporting and escalating the matter with the credit rating agency.  

ALWAYS REPAY DEBTS IN FULL
Timely payments of loan EMIs and credit card dues have the biggest impact on your credit score. Under no circumstance should you look at avoiding your responsibility towards the financial institutions — banks, card companies, NBFCs, etc. — who have lent money to you. It should be one of your financial priorities to repay your debts in full. Do not also easily take ‘settlement’ option wherein you pay a lump sum and your lender considers the loan settled. This will have terrible consequences for your credit score.

DON’T CLOSE YOUR OLD CREDIT CARDS
The age of your credit line has an impact in the computation of your credit score. The older your loan or credit card account is, the more positively it reflects on your credit history. It reveals that you have been able to maintain the account through timely payments without defaulting. The longer you keep the card that you have been using and paying off diligently, the more it helps your score.

USE CREDIT CARDS CAREFULLY
Using multiple credit cards is not a problem; however, it can pose a threat if you end up mismanaging them. You may not be financially able to repay the dues or end up over splurging by swiping your card extensively. So keep a watch on how you use your cards. Use them to maximise your rewards. But as a thumb rule, try not to fund consumption and lifestyle with borrowed money.

PRIORITISE REPAYMENT OF OUTSTANDING DEBT
Sketch a repayment plan to get rid of your debts while not compromising on other obligations. Consider repaying your high-costing loans first or consolidate all your loans into one affordable loan. To close your loans earlier than the tenor, save for prepayment by investing or using your bonus amount. This can help you drastically bring down the outstanding amount while also reducing your subsequent EMIs.

MAINTAIN A LOW CREDIT UTILISATION RATIO
Your credit utilisation ratio is the measure of the credit you use as against the credit limit that is sanctioned to you. For example, if you spend Rs 30,000 in a month when your card limit is Rs 50,000, your CUR is 60 per cent. Maintaining a low credit utilisation ratio has a positive effect on your credit score while using up all the credit up to and beyond your credit limit makes you look credit hungry. Ideally, try and keep your CUR at 20-30 per cent for most months. If you plan on maxing out, always have a repayment plan.
Once you have worked on building your credit score with the help of these pointers, remember to check your credit report regularly and report discrepancies, if any, to maintain your score.