How to Raise Your Credit Score by 200 Points in 30 Days ?

If you have plans in the near future to take a loan to tide you through a financial crunch, or purchase a necessary asset, one of the factors you need to consider is your credit score. Often referred to as CIBIL score in India, this score is a mark of your credit worthiness. Most lenders require you to have a credit score of 700 and above if you are applying for an unsecured loan such as a personal loan.

But what if your credit score is below this required level? Is there any quick-fix to rectify it? Is there some way to increase your credit score by 200 points in a single month?

The answer, unfortunately, is no. There is no quick-fix solution to increasing your credit score rapidly. The only time this may be possible is if your credit score is inaccurately recorded due to a data-mix up at the end of the credit-rating bureau. It sometimes happens that someone else’s loan or unpaid debt is reflected in your credit report, thereby lowering your score. In such a case, you could write to the credit rating agency pointing out the error and asking for a rectification. This perhaps is the only time your credit score can be pulled up rapidly to reflect the true level in a matter of days.

However, sometimes your credit score may be low due to you having defaulted on EMIs, or delayed credit card and loan repayments, or due to numerous loans in your name. While sometimes this may be due to financial difficulties, at other times it may be simply due to a little carelessness on your part. If such is the case, you need to take steps to pull your credit score up. Remember, a low credit score affects your ability to leverage credit when you really need it.

Here are some of the steps to undertake to increase your credit score in such scenarios:

Lower Your Credit Utilisation Ratio:

Your Credit Utilisation Ratio (CUR) is the ratio of your debt to the available debt limit. Thus, if you have credit cards with a total limit of INR 200,000/- per month and you spend INR 50,000/- in a given cycle, your CUR for the month is 25%. Having a CUR of more than 30% drives your Credit Score downwards. Thus, keep your CUR within the 30% limit to improve your credit score.

Be A Responsible Payer:

Late payments of EMI, defaults and non-payment of loans drastically reduces your credit score. If this is a habit pattern, you need to change it immediately. Keep reminders to pay your dues on time. Budget wisely at the beginning of the month. Avoid unnecessary expenditure. If keeping track of payment schedules is a genuine problem, you may want to consider a debt consolidation loan to streamline your repayments. IIFL Finance offers Personal Loans for Debt Consolidation.

Limit Your Loan and Credit Card Applications:

Too many loan and credit card applications result in hard enquiries by lenders regarding your credit score. Each hard enquiry drives your credit score downward. Thus, limit the number of loan and credit card applications. Do keep in mind though, that no credit in your name may mean no credit score! So, make sure you have a credit record that credit rating agencies can track.

Do Not Close Old Accounts:

While many of us are tempted to close old credit card accounts or cards we rarely use, it may not be a good idea to do so while trying to raise your credit score. Closing old accounts decreases the total available credit in your name and this will impact your Credit Utilisation Ratio.

So, while there are no measures to magically increase your credit score in a short span of time, it is possible to increase it gradually with steady effort. Whether or not you foresee needing a loan in the near or distant future, times are uncertain. Check your credit score from time to time. Your checking of your own credit score is considered a soft-enquiry and does not impact your credit score. Keeping a good credit score will ensure that you can avail credit on competitive and reasonable terms from recognised and registered banks and Non-financial Banking Companies such as IIFL, whenever you require.