Three ways to improve your credit score

Before a loan is granted to a customer, the bank or financial institution carries out various checks to make sure that the customer will repay the loan along with the interest due. One such determinant when granting a loan is the credit score. This measure indicates the customer’s credit history, with respect to his bank and loan accounts, repayment track record and total debt level.

While credit score ranges from 300 to 900, a fair credit score is between 550 to 700 and a very good credit score ranges from 700 to 900. A person can inculcate good credit habits which go a long way in maintaining a good credit score. Here are some of the best practices.
Credit discipline
It is important to create discipline with respect to repayment of credit. EMIs and credit card dues must be paid before due date. Creating reminders or setting up auto debit instructions work well to maintain this discipline.

Creating a good credit score
The customer should consciously create a good loan history comprising different forms of credit, short term or long term, secured or unsecured to be able to show a good track record of servicing the credit. A person who has a good track record of repaying the credit, tends to score over a person who has never availed a credit.

Joint accounts
It is important to monitor repayments made to loans where the customer is a joint holder. The customer is equally responsible for making EMI payments on joint loans and this has a direct bearing on the credit score. The same principle also applies to loans guaranteed by the customer.

Points to note

• To check the credit score, a customer can access the latest credit report by paying the prescribed fee on CIBIL website.
• Mistakes or incorrect information found in the credit report can be rectified by following a rectification process.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)