How can we optimize our Credit Score ?

A credit score, a three-digit number, ranging between 300 and 900, determines the creditworthiness of every individual. In India, CIBIL determines the credit score by borrowing capability and repayment of loans. While having a good credit score is essential for availing any credit, it is thus crucial to maintain a good credit score.

Optimizing your credit score: Here are some of the ways by which you can improve your credit score.

Limit Hard Inquiries: Generally, there are types of inquiries that appear on your credit report; soft inquiry and hard inquiry. While a soft inquiry is made by you or your employer to do a background check about your cibil report, however, it does not impact your credit report negatively. You make a hard inquiry when you want to take any credit from the bank/non-banking institution. If you make too many hard enquiries, then it may affect your credit score. Making multiple inquiries indicates that you are hungry for the credit.

Keep a Mixture of Credit Accounts: While there are different types of credits; credit taken through cards, a different kind of loans such as installment loan or real estate loans. You must keep a mix of secured and unsecured credits to maintain a good credit score. If you take too many unsecured loans such as a personal loan, then it can affect your credit score.

Optimize Your Credit Utilization Ratio: Credit utilization ratio is the amount of money used against the total credit limit of the credit card. If you have a low credit utilization ratio, then it indicates that you utilize your money judiciously and also you can make the credit bills on time. You can improve your credit utilization ratio by availing higher credit limits on your card. You must maintain a credit utilization ratio below 30% to improve your credit score.

Open a Major Credit Card: If you have a nil credit history, then you must avail a prepaid credit card. The limit of these credit cards is as per the amount paid by you. These credit cards can help you to build your credit score eventually if you make payments on time. People who have bad credit scores must also avail a credit card to improve their credit score.

Build Your Credit History: Keeping an old credit card helps you to maintain a good credit score. If you get rid of credit cards very fast, then you may lose your credit score. It is thus essential that you have a good credit history with the old cards. If you have a credit card in which your debt is paying, then you must not close the account as it may affect your credit score. Leaving it unused may be an alternate in such scenarios.

Making credit card payments: The best way to optimize your credit score is by timely payments of your credit card bills. Always pay the credit card bills before last minute, don’t overspend, avoid getting multiple credit cards as it is challenging to manage them, use online methods to pay the credit card bills as they are fast and secure.

Thus, you must regularly check your credit report to know the accurate standing about your creditworthiness. In case you notice an error in your credit report, you can contact the credit bureau or concerned bank. You may get free credit reports from various online marketplaces to get information about the credit standing. 


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