One cannot stress enough on the importance of having a high credit score. In order to get access to the credit products like loan or credit card, you need to have a high credit score. If you have a high credit score, you can save money as you will get loans at cheaper interest rates and even discount on the processing fee and other charges. Let us learn more about credit score and how to improve it

What is a Credit Score? 
A credit score is the measure of your ability to repay the borrowed amount. It is a 3-digit number that ranges from 300-900, 900 being the highest and 300 being the lowest. Typically, lenders such as banks and non-banking finance companies offer a credit score 750 and above as good. With a credit score closer to 900, you can get better deals on loan as well as credit cards. A higher credit score suggests you have a low-risk of turning a defaulter while a low credit score suggests you have a high-risk of turning a defaulter.  

Factors affecting your credit score: 

Payment history – 35% 
Credit inquiries – 10% 
Age of the credit – 15% 
Type of credit – 10% 
Amount of debt – 30% 

Credit scores are calculated by the credit information companies which are licensed by the Reserve Bank of India (RBI). There are four credit bureaus in the country viz – TransUnion CIBIL, Equifax, Experian, and CRIF HighMark. Each credit bureau uses its own algorithm and method to calculate credit scores. They take into consideration the aforementioned factors while calculating your credit score.  

How to get a high credit score? 
Pay credit card bills and EMIs on time 
A single late payment can bring down your credit score by 80-100 points. It is biggest factor that affects your credit score is your repayment history as it accounts for 35% of your total credit score. You should pay your credit card bills and EMIs on time and avoid late payments.  You can even turn on the auto-debit facility to avoid late payments. 

Avoid minimum balance due 
You should pay the full bill amount instead of opting for minimum balance due in order to improve your credit score. Paying minimum balance suggests, you are not able to handle credit in an efficient way. It also looks bad for your credit profile. 

Clear all pending dues 
It is advised to clear off outstanding dues, if any. This should be done on priority as outstanding bill payments can take a toll on your credit score. 

Maintain a low credit utilisation ratio 
As per experts, you should use only up to 30% of your credit card limit. Maxing out your credit card every month suggests you are credit hungry and are not able to manage your finances. Maintaining a low credit utilisation is important to improve your credit score. 

Do not close old credit cards  
A long credit history gives your credit score a good boost. Therefore, it is better to keep your old credit cards as the can have a good credit history and responsible repayment behaviour. 

Limit multiple credit inquiries  
You should not make all the credit inquiries at the same time as it may trigger hard checks from lenders. It is better to inquire for credit only when you need it and instead spread them throughout the year. 

Maintain a balance of secured and unsecured credit 
It is important to maintain a healthy balance of different types of credit. Make sure to have secured as well as unsecured loans. Too many unsecured loans can bring your credit score down. 

Review your credit report periodically 
A credit report has all the information related to your current and past credit accounts. Errors in credit reports related to your credit accounts can affect your credit score in a negative way. Therefore, it is necessary to check your credit report from time-to-time as it even helps you understand the areas where you need to work to better your credit score. 

Check your credit score from time-to-time 
It is a good habit to check your credit score regularly as it gives you an idea of your credit health. When you keep a tab on your credit score, you can take timely measures to improve it. You can check your credit score for free by visiting the official websites of the credit bureaus. 

Benefits of having a high credit score 

- Quicker loan approvals 
- Access to better loan and credit card deals 
- Waiver from processing fee and other charges 
- Cheaper interest rates for loan 
- Credit cards with higher credit limit 

You should know that building a credit score is a slow process. It requires a lot of discipline and consistent payment behviour to become a responsible borrower. You should start working on your credit score at an early stage to reap maximum benefits in the later stage of your life. All the best! 

Author's Bio: 

Deepti here and I work as a freelancer, Blogger and specialize in compiling blog posts on the topics related to financial products like Credit Score, Credit Report, CIBIL Score, CIBIL Report, Equifax, Fuel Resources such as Petrol, Diesel, Crude Oil and so on.