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5 ways to improve your credit score – Past relationship with credit


5 ways to improve your credit score – Past relationship with credit

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5 ways to improve your credit score – Past relationship with credit | The Economic Times

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Past relationship with credit

How one has dealt with credit in the past decides if you will get a loan again or not and for how much amount. A low credit score means constraints while getting a higher loan amount sanctioned for a critical purchase. Therefore, it is important that one has reasonable credit behaviour with a good repayment track record. (Content courtesy CIEL, ET Contributors) (Compiled by Shaveta Dua)

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History of credit
Not taking any credit or loan in the past does not mean one has a good credit score. In fact, if there is no data that can track the credit behaviour of the customer, the credit score in such cases tends to be on the lower side. Hence, use credit cards diligently, take loans over a period of time for short and long term to create a good credit history. This helps the customer avail of a competitive rate of interest and /or quantum for a larger loan.

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Repayment
One should follow healthy credit repayment habits by paying credit card bills before due dates and timely payment of instalments for different loans to create a good credit history. Setting up reminders and creating auto debit mandates for such payments help timely action and thereby pushes up the credit score.

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Loan quantum
It is prudent to close one loan and then take the next one to show enough liquidity and ability to repay loans on time. One should make sure that while loans are availed of over a period of time, they avoid taking different forms of credit at the same time. For instance, an outstanding vehicle loan, along with an EMI for credit card dues and personal loan at the same time may reduce the ability to avail of more credit.

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Points to note
Multiple enquiries for loan to different lending agencies also affects the credit score negatively. If there are any data errors in the credit report which affects the credit score, one can apply for rectification of the same with the credit rating agency.

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