How Long Does it Take to Improve Credit Score?

Previously, there could have been various reasons for your low credit score, such as poor payment track record, over exceeding credit limit, multiple credit products, errors in your credit report, etc. But going further, if you abide by the below discussed measures, it shall definitely help you to improve your credit score in next few months and secure your financial future. Let’s discuss ways to improve your credit score along with the basics of credit score.

Key Measures To Improve Your Credit Score

Follow the below stated measures to enhance your credit score and increase the chances of loan or credit card approvals:

Improving Payment History

By regular and on-time payments of credit card EMIs and loans, your payment history gets improved that eventually results in an increase in your credit score. Even if you miss a single payment of credit card or loan EMIs, your credit history gets hugely impacted which results in the fall of your credit score. Thus, an improved payment history plays the most vital role in building your credit score.

Lowering Credit Utilization Ratio

Credit Utilization Ratio (CUR) is an important factor that influences your credit score. To maintain a good credit utilization ratio, it is advised to use less than 30% of the total available credit limit. Even though using the credit limit in the range of 30-40% may not have an impact on credit score but maxing out your card having a high CUR may surely impact your credit score, negatively. Therefore, to avoid the expense burden on single credit product, it is better to divide the burden by availing multiple credit products, as it helps in reducing the credit utilization ratio.

Maintaining Good Mix of Credit

Mix of credit can be maintained by availing more of secured loans, as compared to unsecured loans. Secured loans, such as home loans or car loans, help to increase the credit score as they are termed as long-term appreciating assets. As the repayment tenure is higher for home loans, it becomes evident that the borrower shall be making regular payments for longer duration to the lender, which will help in maintaining and balancing the credit score.

Avoiding Closure of Older Accounts

Most people have this misconception that closing the less functional or old accounts may help in increasing their credit score, which is incorrect. So, it is always recommended to not close your old accounts or old credit cards, as it negatively impacts your credit score. Older accounts show your long-term association and connection with the banks or NBFCs, which is considered good by the credit bureaus. This further helps in the improvement of your credit score in due coarse of time.

Regular Monitoring of Credit Report

Keeping a regular track of credit report is an important practice in maintaining and rebuilding credit score. There could be instances of incorrect or inaccurate personal information being present in your credit report, which is supposed to be immediately reported to the credit bureaus by submitting disputes. Error-free credit report can further be checked for managing personal finances and to avoid being a victim of identity theft.

Not Applying for Multiple Credits in Short Duration

Applying for multiple credit products at once depicts you as a credit hungry person, and this credit hungry behaviour is immediately tracked by credit bureaus which further leads to fall in the credit score. Therefore, avoid applying for multiple credit products at once. Even banks and NBFCs doubt in giving approvals to such applicants, as they find a person at high risk who may be unable to pay the loan amount on time and incur losses for the lender.

Also Know: How can I check my credit score for free without affecting it?

Additional Tips to Raise your Credit Score

If you are still searching for ways on how to increase credit score, then here are some additional tips that can be considered and implemented for enhancing your credit score.

• Your credit score is affected if you enquire about other credit cards. Therefore, you should avoid this practice and investigate about a credit card through the online platforms conveniently without actually interacting with the different credit card companies
• To keep your credit utilization ratio low, you should reduce your dependency on credit. If your CUR is constantly high, you can request the bank to raise your credit limit or switch to alternate payment methods to make your purchases
• Maxing out your credit limit constantly can lower your credit score significantly. Therefore, keep a buffer limit and never cross it
• Make sure you borrow only what is required for the repayment of loans and bills

Let us understand some of the basic features related to credit score and ways to improve it.

Basics of Credit Score 

Credit Score is a 3-digit numeric that ranges between 300-900, which depicts your creditworthiness and summarizes your financial repayment capability and capacity. According to credit bureaus and score close to 900 is considered good, however a credit score of 750 or above is marked as decent enough to make you eligible for numerous financial products. Credit Score below 750 requires time to increase but still there are possibilities for an individual to make it to the mark of 750 and above.

Credit Score of individuals with no credit history or NIL usage of credit can be improved in a few months, but individuals with loan debts or missed EMIs (Equated Monthly Instalments) payments regularly can get their score improved, relatively in lesser time. Presently, there are four major credit bureaus that provide credit scores to Indian customers, such as TransUnion CIBIL, Experian, Equifax and CRIF High Mark.

FAQs

Q. Can I improve my credit score in 3 months?
Ans. Ideally, the time required for any change in your the credit report by credit bureau is at at least 2-3 months. So, 3 months shall be bit more early to see any change in your credit score.

Q. How long does it take to build a 700 credit score?
Ans. Usually, it depends on your existing credit score that how much time it shall be required to reach 700 or above. Generally, it takes few months to see any change in your credit score as it is not an overnight process.