10 ways to improve your credit ratings

Credit Rating or credit status is an important item that one needs to watch, if he/she is keen to borrow loans or avail credit cards from the market. Lending institutions attach a significant amount of importance to credit status. Here are some tips to help you maintain and improve your credit status.

1. Basics first. Ensure that you pay your instalment repayments as per the schedule. If you pay late, lender find it unacceptable. This might affect your chances of getting credit.
2. If you are using credit cards, ensure that the balances on your credit cards are low. Also, if you have a certain limit on your credit card, try to keep your usage of the credit card as low as possible.
3. Ensure that you have a good assortment of secured and unsecured credit. Ideally, if you have a home loan, auto loan and some credit cards, with all of them being serviced in time, it should serve you well. But if you just have a large number of credit cards, without any loans, try to close some of them. Credit cards are expensive and hence the lenders would wonder as to why you are using expensive credit.
4. When you need more credit, think twice before going ballistic about applying to multiple lending institutions. Be judicious in choosing one or at the most two lending institutions to apply. Study and enquire about your best chances of getting a loan or a credit card from an institution and then approach the one where you see the possibility being the best. This is because, every time you apply for credit, an enquiry is triggered to credit bureau and it reflects on your credit report. More the number of enquiries, more is the negative impact on your score.
5. If you are a co-applicant or a guarantor on a loan, please take personal interest in ensuring that the repayments in those loans are going regularly. If you ignore that and the principal applicant of the loan defaults on the payment, that default will affect your credit score for no fault of yours.
6. Get your credit report from the credit bureau and review it at frequent intervals. Doing the above things would bring about a gradual improvement in your credit score. And when you look at your credit scores frequently and see them improving, you get to feel good and feel encouraged to improve them further.
7. Ensure that you credit score is above 750. If for any reason, your current score is below that, work diligently with the help of above tips to gradually improve it and bring it above 750. Keep a record of your credit scores over a period of time. So if you show to a lender that in Jan 2013 your credit score was 650, but the same got improved to 750 by December 13, the lending institution would view this positively.

Follow the above tips and maintain good credit health.

(About the author: This article has been written by Mr Brijesh Parnami, CEO Destimoney Advisors)

(Image: Reuters)