How Long Does it Take to Improve Credit Score

There can be various reasons for your low credit score, such as poor payment track record, exceeding credit limit regularly, multiple credit enquiries in a short span, errors in your credit report, etc. But going further, if you abide by the below-discussed measures, it shall help you improve your credit score in the next few months and secure your financial future. Let’s discuss ways to improve your credit score and understand how long can it take to improve credit score.

Key Measures To Improve Credit Score

Follow the below-stated measures to enhance your credit score and increase the chances of loan or credit card approvals:

Improving Payment History

By regular and on-time payments of credit card EMIs and loans, your payment history gets improved which eventually increases your credit score.

Even if you miss a single payment of credit card or loan EMIs, your credit history gets impacted negatively which results in the fall of your credit score. Thus, an improved payment history plays the most vital role in building your credit score.

Lowering Credit Utilization Ratio

Credit Utilization Ratio (CUR) is an important factor that influences your credit score. To maintain a good credit utilization ratio, it is advised to use less than 30% of the total available credit limit.

Even though using a credit limit in the range of 30-40% may not have an impact on your credit score, maxing out your card or having a high CUR may impact your credit score negatively.

A high CUR shows you are highly dependent on credit and can be a risky customer in future, thus reducing your creditworthiness.

Maintaining Good Mix of Credit

Mix of credit can be maintained by availing secured loans and unsecured credit in a judicious manner. Secured loans, such as home loans or car loans, help to increase the credit score as they are termed long-term appreciating assets.

As the repayment tenure is higher for home loans, it becomes evident that the borrower shall be making regular payments for a longer duration to the lender, which will help in maintaining and balancing the credit score.

Avoiding Closure of Older Accounts

Most people have this misconception that closing the less functional or old accounts may help in increasing their credit score, which is incorrect.

A longer age of credit history allows lenders to assess your credit behaviour for a longer term. So, it is always recommended to not close your old accounts or old credit cards, as it can negatively impact your credit score.

Older accounts show your long-term association and connection with the banks or NBFCs, which is considered good by the credit bureaus. This further helps in the improvement of your credit score in due course of time.

Regular Monitoring of Credit Report

Keeping a regular track of credit reports is an important practice in maintaining and rebuilding credit scores.

There could be instances of incorrect personal information being present in your credit report, which is supposed to be immediately reported to the credit bureaus by submitting disputes. Any incorrect information in your credit report has potential to dent your credit score significantly.

The error-free credit report can further be checked for managing personal finances and to avoid being a victim of identity theft.

Not Applying for Multiple Credits in Short Duration

Applying for multiple credit products at once depicts you as a credit-hungry person, and this credit-hungry behavior is immediately tracked by credit bureaus which further leads to a fall in the credit score. Therefore, avoid applying for multiple credit products at once.

Even banks and NBFCs refrain from giving approvals to such applicants, as they find a person at high risk who may be unable to pay the loan amount on time and incur losses for the lender.

Also Know: How can I check my credit score for free without affecting it

Additional Tips to Raise Your Credit Score

If you are still searching for ways how to improve credit score, then here are some additional tips that can be considered and implemented for enhancing your credit score.

• Your credit score is affected if you enquire about other credit cards. Therefore, you should avoid this practice and investigate a credit card through online platforms conveniently without actually interacting with the different credit card companies
• To keep your credit utilization ratio low, you should reduce your dependency on credit. If your CUR is constantly high, you can request the bank to raise your credit limit or switch to alternate payment methods to make your purchases
• Maxing out your credit limit constantly can lower your credit score significantly. Therefore, keep a buffer limit and never cross it
• Make sure you borrow only what is required for the repayment of loans and bills.

Let us understand some of the basic features related to credit score and ways to improve it.

Basics of Credit Score 

Credit Score is a 3-digit numeric that ranges between 300-900, which depicts your creditworthiness and summarizes your financial repayment capability and capacity.

According to credit bureaus, the score close to 900 is considered very good, however, a credit score of 750 or above is marked as decent enough to make you eligible for numerous financial products.

Credit Score below 750 requires time to increase but still, there are possibilities for an individual to make it to the mark of 750 and above.

Credit Score of an individual with no credit history or NIL usage of credit can be improved in a few months, but individuals with loan debts or missed EMIs (Equated Monthly Instalments) payments regularly can get their score improved, relatively in less time. Presently, four major credit bureaus provide credit scores to Indian customers, such as TransUnion CIBIL, Experian, Equifax, and CRIF High Mark.

FAQs

Q. Can I improve my credit score in 3 months?

Ans. Ideally, the time required for any change in your credit report by the credit bureau is at least 2-3 months. So, 3 months shall be a bit early to see any change in your credit score.

Q. How long does it take to build a 700 credit score?

Ans. Usually, it depends on your existing credit score and how much time it shall be required to reach 700 or above. Generally, it takes a few months to see any change in your credit score as it is not an overnight process.

Q. Why my credit score is not improving?

Ans. Your credit score may not improve immediately if you start today. It may take some time, say about 6 months, to show positive signs in your credit report.