What is a credit score?

Credit Score is a three-digit number ranging from 300-900. Banks and lenders use this score to decide whether to give you a loan/credit card or not. Credit Score helps the lenders see how likely you are to repay your credits on time if they grant you a credit card or loan.

900 being the highest, the higher your score, the more likely you are to qualify for loans/credit cards at the most favorable terms, which will save your money.

How do I maintain my credit score?

If your Credit Score is weak it takes time to make it better, but the sooner you address the issue, the faster your score will go up. These are a few ways that you can do to improve your credit score

  1. On-Time bill payment

When lenders review your credit report, they’re very keen about how reliably you pay your bills. That’s because past payment performance is considered a good record of future performance.

You can maintain this credit scoring factor by paying all your bills on time. Paying late or less than what you originally agreed to pay can negatively affect your Credit Scores.

If you’re behind on any payments, you should clear the dues as soon as possible.

  1. Low utilization of Credit Cards

The Credit Utilization Ratio is another important number in credit score calculations. It is calculated by adding all your credit card balances at any given time and dividing that amount by your total credit limit. Here is an example, if you typically spend about INR 2,000 each month and your total credit limit across all your cards is INR 10,000, your utilization ratio is 20%.

People with the best credit scores often have very low credit utilization ratios, usually 30% or less. A low Credit Utilization Ratio tells lenders you haven’t maxed out all your credit cards and know how to manage your credit well.

  1. Keep Unused Credit Cards

Keeping unused credit cards open, as long as they’re not costing any money, is a smart strategy, because closing an account can increase your credit utilization ratio. Your credit score may get lower if you owe the same amount but having fewer open accounts.

  1. Avoid Multiple Inquiries

You can increase your overall credit limit by opening a new credit card, but the act of applying for credit creates a hard inquiry on your credit report. One major thing that can negatively impact your credit score is too many hard inquiries.


  1. Check Inaccuracies on Credit Reports

You should check for inaccuracies on your credit reports. Incorrect information on your credit reports could lower your scores down. It is necessary that you verify that the accounts listed on your reports are correct. If you see errors, dispute the information and get it corrected instantly. Monitoring your credit on a regular basis can help you spot inaccuracies.


Author- Mr. Jitendra Jha, Business Head, WeFin

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