Having a good credit score is crucial when it comes to obtaining credit and getting favourable loan offers. Lenders check credit reports to evaluate an individual's repayment discipline, credit mix, credit utilization ratio, and credit history.
If you check your credit score and find that it is poor or non-existent, don't worry! There are proven methods to improve your credit score. In this article, we will discuss four important steps that beginners can take to improve their credit health. Read on to explore ways to increase your credit score.
At Shriram Finance, we understand the importance of having a high credit score. As one of India's leading non-banking financial companies, we offer various credit solutions including personal loans, small business loans, car loans, home loans, gold loans, and more. Apply for credit score-friendly loans at Shriram Finance.
We aim to provide individuals with the tools they need to improve their financial well-being and improve credit scores. Let's dive into the steps you can take to improve your credit score fast and unlock better opportunities for yourself in the future.
Here Are Four Important Things A Beginner Should Do to Build A Good Credit Score
If you're a beginner aiming to build a good credit score, here are four crucial steps to follow on how to increase your credit score:
Establish Credit History : Start by opening a credit account, such as a secured credit card or a small loan. Regular, on-time payments will gradually build a positive credit history.
Manage Credit Utilization : Keep credit card balances low about your credit limits. Aim to use around 30% or less of available credit to demonstrate responsible credit use.
Make Timely Payments : Consistently pay bills and credit card balances on or before the due dates. Late payments can have a significant negative impact on credit score.
Monitor Your Credit Report : Regularly check your credit report for errors or discrepancies. Address any issues promptly to ensure credit information is accurate.
By adhering to these steps, you can effectively learn how to increase your credit score and lay the foundation for a strong credit profile
The below-mentioned tips are the best way to increase your credit score quickly and immediately.
Tip 1: Apply for a credit card
Tip 2: Don't put multiple credit card applications at once
Tip 3: Become an authorized user of a credit card
Tip 4: Regularly use your credit card but not up to the limit to Build a Good Credit Score
By following these tips and being consistent in your efforts, you can increase your credit score quickly. Stay tuned to learn more about these steps in detail, as well as additional strategies to boost your credit score.
There Are Two Types of Credit Cards - Secured And Unsecured Credit Cards:
Unsecured Credit Card
An unsecured credit card is an excellent option to build a credit score, but beginners often face challenges in obtaining it due to their lack of credit history. To be eligible for an unsecured credit card, you need to have a considerable and good credit history along with sufficient income that indicates your creditworthiness. An unsecured credit card is the best way to increase your credit score to 800.
Secured Credit Card
For individuals who are new to credit or do not have a steady income, a secured credit card can be the right choice. Secured credit cards are issued against a security amount or collateral, typically in the form of a fixed deposit. This means that the bank holds a portion of your fixed deposit as security against the card's limit. It also helps in improving credit scores immediately.
Don't Put Multiple Credit Card Applications at Once
If you have no or low credit score, it may be tempting to apply for multiple credits simultaneously in hopes of getting approved by at least one lender. However, this approach can backfire and negatively impact your credit score and will not let your credit score improve. Each time you apply for a new line of credit, lenders conduct hard inquiries that temporarily bring down your score.
Apart from lowering your score, multiple applications within a short period may also portray you as being overly reliant on borrowing or exhibiting desperate credit behaviour. Instead of applying for multiple credit cards or loans at once, focus on building your credit score gradually and responsibly.
Become An Authorized User of a Credit Card
Another method that beginners can use to build their credit score is by becoming an authorized user on someone else's credit card. This technique is especially useful if you do not have a credit history of your own. By being added as an authorized user, you can utilize the main account holder's credit profile to boost your credit score.
However, it is crucial to use the authorized credit card responsibly. Any missed payments or excessive spending could not only harm your credit score but also negatively impact the primary account holder's score. Therefore, it is essential to communicate with the main account holder and ensure that they maintain a good credit score as well.
Regularly Use Your Credit Card but not up to the Limit
After obtaining a credit card, regular usage is key to building a strong credit history . Aim to use a credit card every month, making small purchases that are easily manageable within your budget. Timely repayment and continuous usage are important factors in building your credit score and will help demonstrate your ability to handle credit responsibly. Keep checking your free credit score to track your credit history.
While using credit cards regularly is important, it is equally crucial not to max out the available limit each month. It is recommended to maintain a credit utilization ratio below 30%. This means using no more than 30% of your total available credit limit.
Conclusion
To improve and maintain a good credit score, beginners should follow these four important steps: apply for an unsecured or secured credit card based on eligibility criteria, avoid multiple credit card applications at once, become an authorized user of a credit card responsibly, and regularly use your credit card without maxing out the limit.
Remember, building a good credit score takes time and patience. The above-mentioned steps might not solve your query about how to increase your credit score in 30 days, but they set the foundation for ongoing credit score improvement.
If you are wondering how to get a good credit score then do contact the Shriram Finance team of experts. At Shriram Finance, we understand the importance of a good credit score. By responsibly managing your finances and utilizing our offerings, you can take significant steps towards achieving a strong credit profile. Take control of your financial future today with Shriram Finance.
Key Highlights
- Apply for suitable unsecured or secured credit cards.
- Avoid multiple simultaneous applications for credits.
- Become an authorized user of someone else's responsible account.
- Regularly use your credit cards but keep the utilization ratio below 30%.
- Pay EMIs fully and on time.
FAQ's
1. How can beginners build a good credit score?
Beginners can build a good credit score by following these steps:
- Apply for a credit card, either unsecured or secured, based on their eligibility.
- Avoid putting multiple credit card applications at once
- Become an authorized user of someone else's credit card and use it responsibly.
- Maintain a credit utilization ratio below 30%.
- Pay their EMIs fully and on time.
2. How important is it for beginners to develop a good credit score?
Developing a good credit score is crucial for beginners as it determines their creditworthiness and affects their ability to obtain loans and favourable offers.
3. What are the common mistakes beginners make when trying to build their credit score?
Common mistakes beginners make when building their credit scores include:
- Applying for multiple credits simultaneously, leading to hard inquiries that negatively impact their score.
- Maxing out their credit cards
- Making late repayments
- Not monitoring their credit history regularly.
4. How long does it typically take for beginners to see an improvement in their credit score?
The time it takes for beginners to see an improvement in their credit scores varies based on individual circumstances and financial behaviour. Generally, it may take around six months or longer to start seeing positive changes, provided they follow responsible credit practices consistently.
5. Are there any resources or tools available to help beginners with credit score building?
Yes, there are resources and tools available to assist beginners with building their credit scores. They can use online platforms to check their free credit reports and scores periodically. Additionally, various financial institutions provide educational materials and guidance on improving credit scores.
