How To Repair A Damaged Credit Score

Kolkata, December 4: As we all know a credit score is important when you apply for a loan. A credit score lower than 700 might make you ineligible for a loan. On the other hand a credit score of 750 and more can help you get a loan at a better interest rate. If you plan to apply for a car loan or a home loan in the near future and if your credit score is poor, you can always take steps to repair your credit score. We tell you five things you can do to repair a damaged credit score. 

1. Check your credit reports: Check your credit reports at regular intervals. This will give you an idea about what all is recorded in your credit report and the loans and the defaults that are bringing down your credit score. Also, in some cases the information recorded might not be correct. For example, even if you have made timely payments or closed a loan, that may not be reflected in your credit score. You can always approach the bank and the credit rating agency to correct the situation. 

2. Pay credit card bills and EMIs on time: Paying your bills on time is important in such a scenario as failing to do so will impact your credit score further. Make it a point to pay back your credit card dues in full every month. If you have the habit of making the minimum payment, make sure that you do not do that anymore. Any missed payments can further pull down your credit score. 

3. Close all your dues: If you have run up a huge debt with your credit card company, close the debt account as early as you can. If required, you can redeem some of your savings or use some windfall amount you may have earned. High interest loans need to be cleared off at the soonest so that your credit score does not suffer more.

4. Maintain a good credit utilisation ratio: This represents the extent to which you are using your credit card. If you are continuously using your credit card to its maximum limit, it shows that your finances are not in shape. This will impact your credit score. It is best to have a credit utilisation ratio of 30-40 percent. So if your credit limit is Rs 1,00,000 you should not spend more than Rs 30,000 to Rs 40,000 on your credit card. This can be from one card or from multiple cards. 

5. Do not make too many applications for loans: If you have applied for a loan or a credit card to one lender and it has been rejected, do not approach another bank immediately for a loan or credit card. The new bank will see your credit score again and may reject your application again. This can adversely affect your credit score. The best thing to do is to wait for the credit score to improve before applying again. Remember that every time you make an enquiry, it is recorded in the report and it affects your credit score.