Playstore Icon
Download Jar App

5 tricks to help you improve & maintain your credit rating

Team Jar
October 27, 2022
5 tricks to help you improve & maintain your credit rating

Don’t let a bad credit score stop you from fulfilling your dreams and aspirations. Read these tricks below to know how to improve your credit score.

Your credit score is instrumental in determining your value as a borrower. It's a three-digit number, ranging from 300-900, that determines your creditworthiness. Simply put, it indicates whether you have the financial capability and discipline to return the money if a lender decides to give it to you. So, the higher your score is to 900, the better your chance of getting a loan or a credit card with favorable terms and benefits. 

However, if your credit rating is anywhere below 750, it is considered bad. It can drop due to many reasons. It could be:

  • You may have paid your bills late
  • You may not have paid at all
  • You may have utilized your entire credit limit
  • Perhaps, you have closed an unused credit account
  • You may have applied for loans or credit cards multiple times
  • Your credit history is not long enough

Whatever the reason is behind the dip in your credit score, you can miss out on many opportunities and benefits as a result.

How Bad Credit Score Can Affect Your Life?

A bad credit score can make your life difficult in many ways. It can even delay your retirement. But there's more to it. Here are ways a bad credit score affects your life.

  • H3: You Get Burdened With Ultra High Interest

Most reputable banks and credit card providers follow rigorous standards regarding credit scores. But if your credit score is bad and you decide to go for unrequited sources like payday loans, pawn shops, or secured loans, you may have to pay unusually high interest rates. 

There are three types of debts that carry incredibly high interest.

  • Credit cards
  • Personal loans
  • Payday loans

On the other hand, some fixed-rate loans are available in the market that commonly carries less interest.

  • Housing loan
  • Car loan
  • Education loan

Let's take an instance. On average, credit card providers in India charge anywhere between 14% to as high as 47% annual percentage rate (APR)! Yes, shocking but true. At the same time, yearly interest on housing loans, on average, is  6-12%.

So, make sure you improve your credit score and then apply for credit from reputable companies only. If you need further information, read our guide on how to use credit cards like a pro here.

  • H3: You May Miss Out On Many Career Opportunities

Many companies in India and abroad check every job applicant's credit rating before offering them the position. It is especially true if the job comes with a lot of financial responsibilities. Therefore, it is of utmost importance that you improve your credit score.

  • H3: You May Lose Your Chance To Go Abroad

Many countries, especially the USA and UK, check a visa applicant's credit score before making an approval decision. So, if your credit score is less than stellar, chances are your visa application may get rejected. So, make sure you check all the visa regulations and maintain a good credit score if you are planning to go abroad.

  • H3: You May Not Be Eligible For Pre-Approved Loans

Pre-approved loans can make your journey to apply for loans extremely seamless. If you have a good credit score, the bank or credit card provider will not have to run a hard inquiry (which temporarily reduces your credit score). But you may not be eligible for this facility if you have a poor credit score, even if you have an excellent relationship with your bank.

  • H3: Starting A New Business Can Become Challenging

If you are looking for a business loan with a bad credit score, you may be out of luck. Most banks, NBC, and online lenders do not provide a business loan if the owner has a questionable credit history. So, if you have an outstanding balance, clear them before applying.

  • H3: You May Not Get a Car Loan or Mortgage

Having a car and owning a house is almost everyone's lifelong dream. But, they are expensive investments, one most people take a loan to fulfill. But if your credit rating is bad, you may not be eligible for those loans despite having money for the down payment. Your loan application may get refused, or you may have to pay a higher interest rate.

How To Increase Credit Score?

All is not lost. Having a bad credit score is not the end of the world. Improving a bad credit may be difficult, but not impossible. It may take many months and years, But with good credit management habits, you can overcome this hurdle and increase your score to 800. Follow these tricks to rebuild your credit score:

1. Pay Within The Statement Period

First thing first. Understand your statement period well. If you are using credit cards, your billing cycle is made up of 30 days. But the company offers you 55 days of interest-free period. 

For instance, if your billing cycle is from 10th July, 2022 to 11th August, 2022, you can pay your dues without any additional interest up to 7th September, 2022. The only stipulation is you have to pay your entire outstanding balance. The minimum payment due is subject to interest.

2. Pay Your Bills Regularly & Don't Miss Your Payment Date

The most effective way to improve your credit score is to pay your dues regularly without delay. If you have a habit of forgetting dates, set a reminder. Soon, it will become second nature. You'll not forget the payment dates.

This is one of the valuable responsible credit habits that can keep you away from missing your credit card payment due date. Thus, it will also help you avoid paying late fees and high-interest rates.

Never skip your repayment, even if you are in the middle of a financial crisis. It will only intensify your problem. If you are finding it hard to keep paying a high-interest rate, get in touch with your credit card issuer or loan manager and arrange a payment plan that suits your financial situation.

To know interesting hacks to ward off paying penalties, read the beginner's guide on avoiding credit card penalties.

3. Examine Your Credit Report & Report Errors

Everyone makes mistakes. It is human nature. But when it comes to your credit report, a small mistake can cost you a lot. A small mistake in your credit report can dip your credit score immensely. 

Therefore, be attentive while checking your credit report. If you find even a small error like a mistake in the payment date, someone else's account is synced to yours, etc., be sure to report it and rectify it immediately.

4. Get Secured or Rebuilding Credit Cards

Many banks and credit card providers offer a wide range of credit cards for those who have poor credit scores, such as secured or rebuilding credit cards. As the name suggests, these credit cards help you rebuild your credit score. Secured or rebuilding cards are issued against collateral like bank fixed deposits. If the borrower fails to pay their bill for more than 90 days, the lender has the right to recover the borrowed money from the collateral.

5. Repair Your Credit Score

One of the quickest ways to improve credit score is by taking help from a credit repair company. These companies are third parties who can directly talk to your money lender and make a deal with them for settlement money. They can effectively boost your credit score for a fee within 8-12 months. This comes in handy, especially when you need to invest in something major and cannot wait many years to become eligible for a loan.

Final Thoughts

We understand the hardship a bad credit score brings to one's life. But it is essential to be responsible for paying your debts. So, the next time you take debt or a credit card, make your payments on time and enjoy the benefits they offer. So, develop responsible credit habits to improve and maintain your credit rating.