A credit score is a three-digit number typically ranging from 300 to 900 that reflects a person’s creditworthiness. It’s a metric used by lenders to assess the risk of lending money to you. Here are some tips to improve it.
Pay your bills on time: Payment history is one of the most critical factors in determining your credit score. Ensure that you pay your bills, including credit card bills, loan EMIs, and utility bills, on time.
Keep credit card balances low: Maintaining high credit card balances relative to your credit limits can negatively impact your credit score.
Monitor your credit report: Regularly check your credit report for errors or inaccuracies that could be dragging down your score. Dispute any discrepancies you find with the credit bureau.
Diversify your credit mix: Having a mix of different types of credit, such as credit cards, loans, and mortgages, can positively impact your credit score. However, don’t open accounts you don’t need just to diversify your credit mix.
Keep old accounts open: Closing old credit accounts can shorten your credit history, which may negatively affect your score. Keep older accounts open, even if you don’t use them frequently, to maintain a longer credit history.
Avoid frequent credit inquiries: Applying for new credit frequently can signal to lenders that you’re experiencing financial difficulties or are overextended. Only apply for credit when you need it.
Understand the impact of settling debts: Settling debts for less than the full amount owed can still show up on your credit report and may negatively impact your credit score. Aim to pay off debts in full whenever possible.