Credit score – is not an overnight affair. Not just your present actions but years of past behaviour can affect your credit health. A good credit score and solid credit history are the cornerstones of any lucrative credit card rewards strategy. To get the best interest rates, most lenders will require a CIBIL score above 750. Otherwise, as a high-risk borrower, you’ll have to pay higher interest rates on any loans you take out. However, there is hope. There are plenty of moves you can take to improve where you stand.
Here are 5 effective tips for you to start on the path to better credit
1. Check your credit report
Everybody is entitled to a free copy of their credit report. Look through your report and check its accuracy. See what kind of information is hurting you and create a good plan to address it. Make sure to pay your statement balance on time and in full every month.
2. Keep your oldest accounts open
Long-running accounts add more value to your credit score. Keeping old accounts open helps to keep a long credit history of your report. Also, some credit scoring models may consider only the age of your oldest open account. By closing your oldest accounts, you are shortening the length of your credit history.
3. Pay your bills on time
Make sure that your bills are paid on time and in full to maintain a clean credit history. Paying credit card bills in full rather than paying minimum due amount will help in maintaining a decent credit score.
4. Pay off your debt
This is easier said than done. However, paying down your balances will improve your debt-to-limit ratio. This will, in turn, improve the credit health over time. If you have more than one debts, attack one with the highest interest rates first.
5. Avail a right mix of secured & unsecured loans
There are two types of loans. Unsecured personal loans & Secured personal loans. Secured loans are the ones that you take towards asset creation, such as home loans. On the other hand, unsecured loans are taken for personal purposes, such as car loans. Unsecured loans generally tend to impact your credit score negatively. If you already have a low credit score, try to minimize the unsecured component of your credit portfolio so as to influence your credit score positively.
Needless to say, once you improve your credit, you might find that a good score is a reward in itself.
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