Do you often pay high interest rates on your loans or credit cards? Or, does your lender or card issuer ask you to pay more as EMI than someone you may know? If your answer to any one of the two questions is ‘Yes’, then you are a victim of a low credit score.
A high credit score brings with it several benefits like a low interest rate, better terms, higher repayment tenure, and broader discounts. Such benefits can conveniently decrease your interest bills than the current home loan or other loans’ interest rates. Read this article to discover four simple yet effective ways to boost your credit score.
The Top-4 Ways to Enhance Your Credit Score
When you apply for a home loan or any other loan, the lender would take a look at your credit score and determine the interest rate. If you want a lower interest rate than the current home loan interest rates, you have to increase your credit score. At this point, it is prudent to note that the current home loan interest rates are the lowest when compared to other loans.
However, before taking steps to increase the score, you should find out the reasons why your score is nose diving.
Here are the ways you can boost your credit score!
1. Pay More When You Can Afford To
If you have an existing loan, like a home loan, the chances are high that you pay a fixed amount every month. In the case of a floating rate of interest, your EMIs increase or decrease depending on market rates.
As you continue paying the EMIs on time, your credit score slowly ascends to the top. To accelerate the process, you can pay something extra when you manage some extra cash. Doing so can increase your credit score considerably, as it reduces your credit utilisation ratio.
2. Extend Your Loan Term
At times, your lender may tell you the advantages of closing off your loan account, like a home loan, early. The lure of massive savings may prompt you to opt for a short tenure loan. While it’s true that a short duration indeed makes you debt-free earlier, it can also increase your loan bills, making it challenging to repay on time.
In such cases, it is better to request your lender to increase the loan term. As you repay the loan bills before due dates, your credit score would jump healthily and steadily.
3. Keep Your Credit Utilisation Ratio Low
The Credit Utilisation Ratio (CUR) is the amount you owe to lenders compared to your net monthly income. If your CUR is 50%, it means you spend 50% of your net earnings to pay credit bills, including home loan EMIs.
If you aspire for a high credit score, your CUR must be below 30%. A low CUR means less stress on your financial health and better credit score.
4. Keep an Eye on the Credit Bureau
While it may seem too naive a suggestion, it can sometimes be the reason behind a low credit score. There are instances when the credit bureau is late in updating your records or might have updated it incorrectly.
It would be best if you check your credit score at least once every month and point out any anomaly. CIBIL, for example, provides you with the CIBIL Dispute Resolution Form, which you can submit online with details of the error.
Boosting your credit score can open up a door of opportunities. In best cases, you can get a much lower interest rate on your loans, like a home loan, than the current interest rates.