How To Increase Your Credit Score ?

Credit score is most important piece of your financial health. You might have heard people saying my targeted credit score is 800 , Higher credit score is important for credibility etc. 

Here is a guide to how to Improve your score  

a) Make your payment on time- This is most important step. Even one time delay in payment and not able to rectify the same in next 30 days can lead to negatively impact on credit score by 100. 

How can you ensure this- By setting up multiple reminder, tracking your due dates , checking your CC and bank movement regularly, setting up auto payments. 

Next is always trying to make payment in FULL. 

b) Having Low credit exposure: You will be analyzed based on your total credit utilization and also individual card credit utilization. Credit utilization is your balance used divided by your credit limit. 

One should target to have credit utilization score of 30 or below. 

Credit utilization is only calculated on last day of your billing cycle, if you have resources, you can always opt to early pay your card just before billing cycle and have low utility cycle. 

You can also make your credit history exposure wider either by having multiple credit cards or increasing your credit limits (or both)

c) Length of credit history: Keep your cards or credits open for longer period . You need to start as early as possible, sooner you open your account is better. 

Credit score works on average length of credit history. 

d) Managing new credit: New credit affects 10% of your score. Keep credit usage low on new credit limit so it wont affect your credit score drastically. 

Practically, If you have immediate requirement for loan and you know your credit score is most important for upcoming 6/ 12 months – you should avoid your exposure to any other small new credit. 

e) Develop your credit mix: It says how are you able to manage your different kind of credit say your cards, mortgages, car loan.  

Above chart explains how much above factors impact your credit score .