How to Increase My Credit Score?
A credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.
Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Lenders also use credit scores to determine which customers are likely to bring in the most revenue. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.
Approval of any loan and amount depends on the credit score which is measured based on following factors:
Payment History: A record of monthly payment status on individual’s credit report listed since the time the accounts were established. A payment history is an indication for lenders and creditors whether an individual is a lending risk due to a history of late or missed payments.
Credit Utilization: This is another big component of the score and one you might be able to exert a little more control over. Credit utilization is a ratio: the current credit you’re using divided by your credit available. Lower is better here; I’ve heard numbers like below 30% thrown around as ideal, which may or may not actually be true, but the main point is do whatever you can to lower this ratio and you should see your score improve as a result. It’s hard to have a bigger impact more quickly than this, assuming you are using credit and have the means to pay it off.
Loan Repayment Tenure: A personal loan can improve your credit scores in the long term as long as you consistently repay the debt on time. A personal loan affects your credit score much like any other form of credit. Make on-time payments and build your credit. Any late payments can significantly damage your score if they’re reported to the credit bureaus.
Short Term Loans: Short term loans are the best way to build your credit score stronger. Apply for small amount of short period of loans and repay on time. It will help you to get higher amount of loans. You can apply for personal loans from non-banking financial companies and replay the scheduled period. Doing such tips will help you to increase your credit score higher.
Pay Bills on Time: Believe it or not, many negative marks on credit reports include delinquencies, late, missed or overdue payments. There are bills that can be paid automatically each month by withdrawal. Paying bill on time will increasing the credit score.