Your credit score is an important 3-digit score that lenders use to determine your eligibility for new credit. This is because your credit score is based on your credit history and provides a holistic impression of your habits.

Simply put, your score is a marker of your financial standing, and lenders assess you based on it. Naturally, it is important that you maintain a good credit score to access the best deals. However, this is easier said than done. 

Building an excellent credit score takes time and continuous effort. It involves planning, monitoring, and making the right decisions consistently. Read on to learn all about the different ways in which you can improve your credit score. 

Pay Your Monthly Dues On Time

Your repayment track record is a crucial aspect of your creditworthiness. If you delay or default on payments, it indicates that you may not manage your finances well. This, in turn, has a negative impact on your score and your chances of availing a personal loan.


To fix this, you can start by setting reminders for your monthly payments. Set a strict deadline and inculcate the habit of paying your dues on time and in full. You can also opt for reminders from the lending institution to ensure that you do not miss payments.

Avail Credit Only When Necessary

Availing credit too frequently or even when not needed can land you in an unhealthy credit cycle. It also shows that you are unable to manage your monthly expenses and are dependent on credit. 

Being stuck in a credit cycle has a negative impact on your score and eligibility for new credit. Moreover, whenever you apply for new credit lenders check your score, which registers a hard enquiry on your profile. Too many hard enquiries in a short period negatively affect your credit score, lowering it.

This then may imply that you are credit hungry, and this hampers your chances of approval for a personal loan. To remedy this, ensure that you are conducting a thorough review of your finances before applying for new credit.

Be Mindful Of Credit Utilisation

Credit utilisation refers to the amount of credit you have used against the available limit. For example, if you have ₹1 Lakh as the limit and you have utilised ₹55,000, your credit utilisation is 55%.

This is considered over utilisation, as the ideal range is 30%. Try to stay within this limit, and cut back on expenses if you have already exceeded it. Continuously utilising more than 30% of your limit will lower your credit score.

If you can’t lower your expenses, and have a strong financial profile, try to increase your limit. This would help bring down your utilisation ratio, having a positive impact on your credit score.

Maintain A Low Debt-To-Income Ratio

This refers to the percentage of your income that you pay toward your existing debt. For example, if your monthly income is ₹70,000 and your payments amount to ₹14,000, your debt-to-income ratio is 20%. 

Like credit utilisation, this ratio is crucial for assessing your creditworthiness. Your debt-to-income ratio provides insight about your financial standing and whether you have the funds to repay a new credit.

A high ratio has a negative impact on your score and increases your profile risk. The ideal debt-to-income ratio is 30%-40%, which means that your monthly repayment should exceed 40%. 

When looking to improve your credit score and do it consistently, focus on maintaining a low debt-to-income ratio. Repay your credit on time and only avail credit after a careful consideration of your finances. 

Have A Healthy Mix of Both Secured And Unsecured Credit

Secured credit is when you provide collateral to the lender in order to get funding. Having too little of it as compared to unsecured credit has a negative impact on your credit score. This is because availing secured credit is comparatively challenging and risker.

When you have secured and unsecured credit proportionately, it implies that you have experience in dealing with different forms of credit. This experience makes your profile favourable for new credit, and hence you have a better score.

Check Your Credit Score And Report Regularly

Credit bureaus calculate your credit score regularly, and checking it regularly will help you stay informed. If you notice a dip in your score, you can quickly take the required measures. Swift actions are key to ensuring that your score is not impacted to a great extent. 

Apart from your score, checking your report is also just as important. Your credit report contains crucial information that can help you make the necessary adjustments to boost your score. 

In some instances, your credit report may not reflect accurate information. This is a potential red flag and bringing it to the notice of the bureau at the earliest will protect your credit score.

Consider Debt Consolidation

There are times when you may have too many monthly payments, making it difficult to track them all. In such cases, you could end up delaying or missing payments. Neither of these options is good for your credit score. In such times, you can consider consolidating your debt.

Debt consolidation is a measure by which you use a loan to repay all your existing debt. Now, instead of making multiple payments, you need only make one single payment. This reduces your chances of missing out on a payment and protects your score.

However, you should not make a habit of this. Debt consolidation solutions often have higher interest rates. As such, your borrowing costs will increase, ultimately straining your finances.

It is crucial that once you reach an excellent credit score, you follow the same habits that helped you reach there. This will help ensure that you maintain your credit score and stay ready for affordable credit whenever you need it

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