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If you have an old and active credit card, do not close it. The older the card, the longer will be your credit history record and it is a positive signal for the score.

If you want to take a loan from any bank or financial institution, then the credit score is your first identity. Banks decide on the basis of this score whether to give you a loan or not and if yes, then on what terms. People who have a good credit score not only get loans easily, but also get facilities like low interest rates and fast processing.

If your score is low, do not worry, with some right decisions and a little caution, you can improve it. But remember, this does not happen overnight, so the sooner you start, the better it will be.

5 ways to improve credit

Get the mistakes in the report corrected

The first step is to check your credit report carefully. Sometimes there are some entries that are wrong, like a payment is shown as 'pending' even though you have paid it. Such mistakes should be corrected immediately.

Keep credit utilization low

If your total credit limit is Rs 20 lakh, try not to use more than 30% of it i.e. Rs 6 lakh. This makes you look like a responsible borrower. If needed, keep more than one credit card, so that the load on one card is not too much.

Build a healthy credit mix

Instead of having only one type of loan (like only personal loan or only credit card), maintain a balance of different types of loans. Like – one credit card, one personal loan and one auto loan. This strengthens your financial profile. However, do not try to take more debt than necessary. Just keep a balance that benefits the credit score.

Pay dues on time

Even a single late fee or default on any EMI or card payment can lead to a drop in the score. So try to make every payment on time, whether it is small or big.

Do not close old cards

If you have an old and active credit card, do not close it. The older the card, the longer your credit history record and that is a positive signal for the score.

When will the effect be visible?

Improving credit score is a slow process, but if you start now, the difference will be clearly visible by the end of the year. You will find it easier to get a loan and can also get better interest rates.

Take the right steps now

If you are planning to buy a house, buy a car or take a loan for any personal need, then preparing for the credit score is as important as planning for EMI. So start today. Check your report, pay off the dues and make yourself a better borrower.