A Credit score can be a delicate thing, and often requires the borrower to tread a fine balance between judicious credit card usage and availing of loans, at the same time making sure that the score is not impacted negatively. In today’s more aware financial times, a higher score typically ensures that when you do need a loan, a lender views your application favorably and you snag yourself the best deal out there.

What constitutes a credit score?

A credit score is arrived at by taking into account the below mentioned parameters:

In order to learn how to boost your credit score, you should ensure that you pay careful attention to each of these, and take adequate steps to get yourself a better score.

Payment history

If you take a closer look, the Payment history constitutes the largest part of the score, standing at a whopping 35 percent of the entire total. This means that the one parameter that should garner a large chunk of your attention should be this one, and focusing on this should help you know how to boost your credit score, for you to be able to maintain good credit health.

Payment history refers to your repayment track record, or how well you service your loan or credit card account in terms of making payment. It always helps to make regular and timely payments towards any outstanding you have, either on or before the due date. Ensuring a steady, regular track record helps a lender assess your application more favourably in case you apply for credit at a future date, because they have your history to fall back on, to understand what are the chances of loan default or the loan going bad.

For instance, an individual with skipped or delayed payments on earlier loan or card outstanding is likely to be perceived as unsteady and someone who may default on payments in the future as well. On the other hand, a clean record with no slip-ups in payment is always a good boost to your credit score.

There are also instances wherein a person has ‘settled’ an outstanding with a lender. Remember that while this closes the loan in effect, it does leave behind negative traces, as a settled loan simply means that the borrower did not have the either (or both) the intention and ability to repay debt. Further, a settled loan also affects your credit score in a negative manner. It is instead better to work out a solution to restructure your loan and pay it off over a period of time, rather than settling it at one go, if it is feasible for both the lender as well as the borrower.

Very often, when we are caught up with other tasks it is owing to lack of time or even just having forgotten a payment due date that we do not make a payment on time. Hence while you have the intention plus the ability to pay, a lender will view it negatively since to them, a payment deadline has been missed. Consider then, setting up a reminder on your smartphone, well in advance to give you sufficient time to make payments. Alternatively, you could also set up options such as ECS or direct debit mandates on your bank account to make an auto payment on the due date, for either the entire amount or the minimum amount due. Remember though that should you choose the latter, you do make the balance payment as well, since rolling over amounts also has its own ramifications.

Credit card debt

While we all love to flash those little rectangles of plastic money, we tend to forget that for some of us they can be veritable debt traps if not taken seriously. Sure it seems easy to spend on the spur of the moment but remember that at the end of the day a credit card outstanding is a debt like any other and needs to be repaid in full. Hence as with a loan, be diligent with repayment and ensure you stick to the due date.

Another aspect when it comes to cards is the credit limit utilization that needs to be taken into account. This is nothing but the total credit limit assigned to you, across all your cards. Generally, the rule of thumb is to not exceed 30 percent of this limit, for a lender to view your application for a loan favourably, because staying within this reasonable limit help you know how to boost your credit score. Make sure that at all times you are aware of how much you are spending, and then spend only just as much as you can repay on your credit card.

In conclusion

Your credit score requires to be monitored and your credit behaviour needs to be satisfactory for the score to remain good and even increase over a period of time. Keeping the above tips in mind will help you improve your credit score.

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