One of the most significant indications of loan and credit card eligibility and the basis for risk-based pricing models, credit scores play a crucial role in our financial lives. Because of the widespread belief that the primary factor in determining your credit score is the length of time it has been since you last made a payment on a debt, we tend to give less consideration than we should to the other important parameters or financial maneuvers that are capable of impacting your credit score that is visible when you check credit score online.
If your goal is to improve your credit score, you should avoid the following six financial moves even if you are diligent about paying your EMI of loans along with all bills of a credit card every time by the due date as well as of full amount every month:
Failing to maintain a utilisation rate of 30 percent or less
In this context, “ratio” means the current credit card balance as a percentage of the total credit limit. When your credit utilisation ratio is above 30%, it is seen as a sign of credit appetite by lenders, and as a result, your iifl credit score will drop slightly by the credit bureaus.
Maintaining a balance of no more than 30 percent of your credit card’s overall limit is advised. If you routinely spend more than this amount, you should contact your card issuer about requesting a higher credit limit or applying for a new credit card. If you increase your total credit limit but keep your card spending the same, your credit utilisation ratio will go down.
Interruption of lender relationships due to frequent credit inquiries
A lender will check credit score online through your credit report from one of the three major credit agencies if you apply for a loan or credit card. Hard inquiries, which are those requested by a lender and have a negative influence on your credit score, are made when a lender actively seeks out your credit history when conducting the task to check credit score online.
In addition, if you make a number of direct credit queries to lenders in a short period of time, this could hasten the rate at which your credit score declines, which in turn could affect your ability to obtain loans in the future. Quick ways to reduce his credit score
Instead of making a number of individual credit inquiries to different lenders, you can save time and energy by using an online financial portal to compare your credit score, income, and other factors with those of many lenders and then choose the best credit choice and lender for you. The credit agencies label the inquiries made by these markets for your credit report as “soft,” meaning they have no bearing on your IIFL credit score.
The share of unsecured loans in total credit expanded.
Your credit mix is defined by the proportion of your total debt that is unsecured vs secured. A higher percentage of secured loans (such as a mortgage, a loan against property, or a vehicle loan) is seen favourably by credit bureaus since such borrowers are preferred by lenders. If you want to raise your credit score, you should reduce the percentage of your debt that is made up of unsecured loans or credit card balance transfers. You can do this by either paying off your existing unsecured debt or taking out new, more secure debt, such as a second mortgage on your home, a loan against your gold or stock holdings, or something similar.
An inability to keep tabs on the repayment of a loan you co-signed or guaranteed
Similar to taking on an additional credit card, taking on additional obligations by cosigning or guaranteeing a loan can be a heavy burden. Cosigners and guarantors are legally responsible for the timely repayment of the loan they are associated with. There would be no difference in the impact on iifl credit score between a delay in repayment or default. Therefore, it is imperative that you monitor the repayment status of any loans that you have co-signed or guaranteed on a regular basis, both to ensure that payments are being made on time and to protect your credit rating from the potential negative effects of the primary borrower’s financial mismanagement.
Problems with a faulty credit report
Lenders and credit card companies contribute data for inclusion in your credit report, from which the credit bureau derives your credit score. When you check credit score online, you can see that it can take a hit if your lender or a credit bureau has made a mistake, provided false information, or committed fraud against you. Therefore, it is essential to obtain your credit report routinely, preferably once a month. This would help find any discrepancies and get them reported to the credit bureau and the lender quickly so that the issue can be resolved as soon as feasible. Under certain circumstances, consumers can get a free credit report once a year from each of the three major credit reporting agencies. In contrast, online financial marketplaces typically provide users with free access to their credit reports and monthly updates.
We are cancelling our old credit cards.
To help determine your credit worthiness, credit bureaus look at several aspects, one of which is the length of time you’ve had credit accounts open on average. Credit card holders should hang on to their earliest accounts for one important reason: lenders give more weight to applicants with longer credit histories. Your credit score will improve in relation to other people whose credit histories are generally longer. Your credit score will improve if your credit history is rather long and has been around for a while. In addition to lowering the average age of your credit history, closing an older credit card reduces your overall credit limit, which increases your credit utilisation ratio and lowers your iifl credit score.
Therefore, it is wise to hold on to your older credit card, and if you have multiple cards and need to cancel some, it is best to close the newer ones rather than, the older ones.