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5 ways to improve your credit score

A good credit score could increase your chances of getting a home loan, a personal loan or a credit card, as well as secure a lower interest rate.

The Credit Information Bureau (India) Ltd (CIBIL) will generate your credit score to determine your creditworthiness. This score ranges from 300 to 900; a score of 700 to 900 is considered a good credit score.

Here, we outline some of the ways in which you can boost your score for a better borrowing outcome.

1. Pay your bills on time

Lenders want to know they can rely on you to make regular repayments and manage your existing debt. Tardy or delinquent payments are likely to negatively impact your credit score. 

They'll be most interested in your payment history of the last 12 months. If you've missed payments in the past, but have since become more reliable, your credit score might not be affected as much as you think.

Set up online mandates for scheduled recurring payments and you'll never miss a deadline again. 

2. Start building your credit history early

It can take about 6 to 12 months of repayments to start building credit.

Your credit report outlines how much you owe, whether you've missed any payments, and if you've gone over your credit limit. Without this history of borrowing and repaying, it's difficult for a lender to determine how creditworthy you are. 

Taking on a small amount of debt can help you borrow larger amounts in the future – as long as you manage it well. Buying a mobile phone or other household items and paying for them in instalments is one way. 

It can be easier to meet the credit card eligibility requirements if it has a low limit. While these cards might come with higher interest rates, if used responsibly and paid off in time you can build credit without incurring any extra charges.

3. Lower your debt-to-credit ratio

Your debt-to-credit ratio – also known as the credit utilization ratio – is the amount of money borrowed in relation to your credit card limit. You want to keep this at about 30% if you can. Spending near, or over, your credit limit every month may appear that you're having trouble managing your finances.

If you're always borrowing more than 30% of your credit limit every month, try to raise the limit. This may seem counterintuitive, but getting an increase proves to the credit bureaus that the lender trusts you with larger amounts of their money. 

You can also try making two card payments in one month to keep your outstanding balance down, or create an alert that will tell you when you're about to reach your ratio. 

4. Don't apply for too many credit cards

Too many card or loan applications within a short time and lenders may be under the impression that you're struggling for money. These hard inquiries can negatively impact your credit score (even if you don't borrow money!). Be careful about giving companies consent to pull your report.

If you just want to compare rates, ask your lender to do a 'quotation search' instead of a 'credit application search'. This means it won't show up on your credit profile. Compare the offers first and check you meet the credit card eligibility requirements before applying. 

5. Double check your credit reports

Mistakes can happen, and these could be costly. Make sure there are no transaction errors and that any amounts showing as owed on your accounts are correct. 

In India, there are 4 main credit bureaus – all licensed by the Reserve Bank of India – that will calculate your credit report. These include:

  • TransUnion Credit Information Bureau (India) Limited (TransUnion CIBIL)
  • Equifax
  • Experian
  • CRIF Highmark

If you think there's been a mistake, you can get a copy of your credit report and file a dispute with the credit bureau. CIBL estimates it can take up to 30 days or more to resolve a dispute.

Transfer your credit history with HSBC

Moving countries? You may have to start from scratch. At HSBC, we can facilitate the transfer of your HSBC Premier credit history from India to help you access similar levels of credit in another eligible overseas country or region. Credit history will be transferred upon request from the overseas HSBC Group and will be subject to local regulations. 

You might also be interested in 

Our step-by-step guide on how credit cards work and how to make the most out of them.
Understand the differences between a credit card and debit card and you'll know when to use them both.
We compare the most common types of credit cards in India, and what they're used for.
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