How to improve your credit score: what to do and what not to do

What is the credit score? It is a statistical number based on your credit history, payment habits and other financial data collected from the financial institution by the rating agencies. Your credit score is an indicator of your creditworthiness. The rating agency collects this data based on a key or unique identifier, such as Permanent Account Number (PAN, issued by the Department of Income Tax in India) or SSN in the US. Each rating agency may assign a different weighting to the different parameters used to determine it. Generally, it ranges from 300 to 850 points.

With the credit score check, the lender gets an idea about the probability of default by the borrower, in the event that a loan or line of credit is granted. The higher the credit score, the better the chances of getting a loan at cheaper rates. Therefore, it is important that you verify it before applying for a new loan or credit. A credit score below 600 is considered poor, and financial institutions generally avoid lending to such people. By maintaining financial discipline, you can easily improve it too. Very little things or ignorance can seriously damage your credit worthiness. By paying little attention to these little things, you can improve your credit score and take advantage of the cheapest credit facilities.

To improve your credit score, you must follow certain dos and don’ts.


1. Never delay payment of past-due payments on existing loans.

2. Always pay credit card bills on time. If possible, use the ECS or automatic debit feature on your card bill payment, so there is no chance of forgetting to pay the bill on the due date.

3. If possible, try to prepay existing loans. Making a small additional payment on top of the EMI or installments due not only helps you reduce your interest outlay, but also helps improve your credit score.

4. Maintaining good, long-standing banking relationships with your existing banker helps you increase your credit score. Frequently changing your banker, especially business-related lines of credit, can bring you down.

5. Also make the payment of your utility bills such as electricity, mobile, insurance premium, municipal taxes, etc. on time. Although these are not directly reported for credit score verification, they help you maintain a financially disciplined life.

not to do

1. Do not take different loans from different banks. Try to use the maximum credit facilities of one or two banks. For example, you have two home loans, two car loans, and one personal loan, each from a different bank. This type of arrangement will lower your credit score. Try to switch all these five loans to one or two banks at most.

2. Do not roll over a credit card balance from one card to another card. Rotating your balance from one card to another means you have no means to pay your credit card bills. This seriously damages your creditworthiness.

3. Do not fully or overuse your credit card limit. In case you regularly go over the 90% limit, ask the credit card issuer to increase your credit limit.

4. Don’t discontinue your old credit cards for no reason or because you’ve taken a new card. The longer the credit history with regular bill payments, the better the credit score.

5. Don’t take too many credit cards from different banks. Keep a maximum of 3-4 cards with the same number of banks. If you use these cards regularly and make timely payments on your card bills, your card company will be happy to increase your card limit.

6. Do not withdraw cash from CREDIT Cards through an ATM unless it is an extreme emergency. Frequent cash withdrawals from your credit card account reduce your creditworthiness; instead, use debit cards linked to your savings account for cash withdrawals.

Try to get your credit score sheet once a year, so you know where you stand. In the event that you find any errors in the transactions reported on your sheet, please report them immediately to the appropriate financial institution for correction and update with the ratings agencies, especially when you are planning to take out a new loan/line of credit.

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