#Smart ways to improve your credit rating

(Whether you are planning )

The numerical figures of 700 and above are fast forming a superpower club that determines what job you should get, what EMI on your insurance & loan you should pay, and what should be the interest rate on your loan.

It also helps determine your marriage eligibility, phone number eligibility and limit and much more. Thus, whether you are planning to buy a home, car or any other product, or want to get a new credit card, your credit score has immense affect on your loan processing as also determining the credit limit.

A credit score, in fact, is a 3-digit number that shows numeric summery of your credit health. Such score is derived by credit bureaus by analyzing your credit history. The score usually ranges from 300 to 900 points and higher scores suggest more chance of getting approval of your loans. But what is a good enough score?

"A score above 700 usually suggests good credit management. A person's credit history, in fact, is a record of how he/she has used and managed credit in the past. Every financial transaction in your life involving credit is recorded in your credit history - from your payment history on your credit card, to your history on paying off your car loan, to any suits that may have been filed on you," explains Arun Ramamurthy, co-founder, Credit Sudhaar, a credit health improvement company which aims at helping individuals become credit healthy.

In India credit scores are calculated by credit information companies such as CIBIL, Equifax and Experian.

Ramamurthy says that credit awareness in India has a long way to go. In fact, Credit Sudhaar conducted a survey across 8 cities in India and sampled over 300 respondents, and found out that more than 85% of the respondents were not aware of credit bureaus. Delhi and Pune led the country with 1 out of 4 respondents being aware of credit bureaus. Bur a whopping 92% of respondents were unaware of their credit scores.

Delhi, Bangalore and Pune had more than 10% respondents knowing their score. The survey revealed that 91% of the customers were not aware of the impact of non-payment of credit dues. While a mere 4% had reviewed their credit score in the last 1 year, 98% of the respondents who took the survey were unable to comprehend the report that was shared with them.

This explains why you not only need to know about your credit rating, but also the ways to repair the same. Here are some tips to improve your credit scores:

Check your credit report:

Credit score repair begins with your credit report. Thus, the first thing to do is to request a free copy of your credit report and check it for errors. "In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. Resolve the errors, if any, immediately with the credit bureau and reporting agency," says Gaurav Wadhawani, co-founder, Credit Sudhaar.

Regular payment of bills:

Many people are still not aware of the fact that as simple as paying bills - even phone bills -- on time can play a very important role in improving the credit score. Your payment history on your credit health report amounts to almost 35% of your total score. So, prevention is better than cure. Therefore, it is important to be consistent with the payment of utility bills. "To have a good score, you need to maintain no late payment status for at least seven years," says Wadhawani.

Pay off a debt:

Another easy method to improve the credit score is by start paying off older loans or debts. Even if the debt amount is small, it is essential to get rid of it by making the payment on time. Minimization of outstanding debt helps to improve the credit score.

Less credit cards and less use:

Although having a credit card can actually help you in being an eligible applicant for loans, however, owning numerous credit cards and making huge purchases with them can reverse the situation. Bad credit scores can be improved by reducing the use of credit cards as well as avoiding having too many credit cards. The ideal would to be use between 10% and 20% or less of the total credit available.

В  No credit card default:

Another important measure to improve the credit score is to pay down the credit cards and avoid credit card default. Generally you should try to make the balance of each of your credit card at least 30% below the credit limit. "It is advisable to give preference to paying down the credit cards close to their credit limit at first," informs Ramamurthy.

Timely payment of EMIs

Pending loans and debts put an impact on credit health. Therefore, it is important to pay them back on time. For people bidding to improve their credit score, it becomes all the more important to pay the EMIs on time. If you are responsible and punctual with relevance to your current loan payments, it will surely improve your credit score.

Don't close unused credit card accounts: