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A perfect credit score is crucial to get smooth access to credit. Getting a perfect credit score requires a high level of financial discipline. While some mistakes that adversely impact your credit score are related to your financial habits, some may be as a result of unintentional errors or mistakes in the report. Hence, it becomes important to follow some basic steps to maintain your score at healthy levels.
Understand how credit agencies calculate your credit score: Most agencies use payment history, types of credit and debt to credit ratio in order to calculate a credit score. If you want to get an excellent credit score, it’s important to understand the specifics of how your score is calculated.
- Each agency computes your credit score in their own ways. However, the most important components measured are your payment history (which shows how consistent you have been in making your payments) and your indebtedness level (it reflects how much credit you qualify for and how much you are using).
- Together, these two make up about two-thirds of your credit score.
Access your credit reports: You should keep checking your credit report at regular intervals. You can easily avail of a copy of your credit score and report from credit bureaus. However, these agencies provide only one free report in a year. Alternatively, you can sign up for a free credit report at MyLoanCare.in and get a free monthly subscription of the Experian credit report. If you find any error, you can get them rectified immediately. Inaccuracies may be falsely reported delayed or missed payment misstated personal information, etc.
Make payments on time: Paying your dues on time is an important part of your credit score. Late payment will lower your credit score and will keep showing up in your report for up to seven years. If you tend to forget to make the payments by the due date, set up SMS or email reminders or give standing instructions for the EMI or credit card amount to be deducted automatically.
Keep your balances low: Credit bureaus look at the ratio of your available credit limits to the amount of debt you have in order to determine your score. It’s advisable to use a credit card only for emergency expenses and pay off the balance as soon as possible. In addition, keep your debt below 35-45% of the total available credit balance. If your debt surpasses this limit, it reflects negatively on your credit report.
Get the right mix of credit accounts: You must have the right mix of credit accounts. If you have only one type of credit account, your score may be lower. For example, secured loans like home loans or car loans improve credit score as they show your credit track record over a long period of time and shows your commitment and ability to repay as you take a loan by pledging your loan. On the contrary, having only unsecured loans such as personal loans, credit card debt in your credit history may pull your score down.
Avoid applying for new credit too often: Applying for a new credit account frequently can have a negative impact on your credit score. This includes applying for loans, credit cards and other forms of credit. When lenders see numerous applications within a short period, they consider you credit-hungry and your application might get rejected. This is why it makes sense to apply through fintech lenders or market aggregators like MyLoanCare.in to zero in on the best loan and credit cards across multiple banks without compromising your credit score. It’s also advisable to keep your new credit applications down in the range of one to three new applications in a six month period.
How to reach the perfect credit score?
Be consistent: To achieve a perfect credit score, you require planning and consistency for years at a stretch. Pay your bills before the due date every month and track your income and expenditures carefully. Only by establishing a system, you will be able to plan your finances and meet your loan repayment commitments consistently over the years
Avoid flaws in your credit history: If you accidentally make a late payment, but you have a good payment history, consider calling your creditor to ask them not to report the late payment. They may consider it out of good faith. You will not be able to get a perfect score if you have negative events like a failure or collections account on your credit report.
Wait patiently for your score to rise : Time is a necessary part of the equation to get a perfect credit score especially when you restart after your credit score declines due to your past mistakes Once, you start working on a credit improvement plan, it should start reflecting gradually as an improvement in your score starting from a minimum of 6 to 8 months. You will need at least 5-7 years of positive credit history before you can achieve the highest score of 850+. Part of your credit score calculation takes into consideration the age of your oldest credit account. For this reason, avoid switching accounts or closing old ones.
These are a few tips that could help you achieve a perfect score. With a little effort and awareness, you can enjoy the many benefits of a healthier credit score.