In India, a credit score of 650 is considered “fair,” but it might limit access to better financial products like low-interest loans or premium credit cards. Top financial institutions usually prefer a score above 750 before offering attractive loan terms or credit cards. If you’re aiming to boost your credit score to 750, it’s possible with discipline and smart financial habits. Here’s a guide on how to achieve that goal.
Why a Higher Credit Score Matters
A higher credit score increases your chances of securing personal loans and credit cards at better terms. Financial institutions look for responsible credit behavior, and a score above 750 indicates that you are a trustworthy borrower. By following these simple strategies, you can steadily improve your credit score.
1. Pay Your Bills and EMIs on Time
Your payment history is the most significant factor in determining your credit score, accounting for about 35%. Missing even a single EMI payment or credit card bill can cause a significant drop in your score. Late payments, even by 10 days, can reduce your score by up to 100 points. To stay on track, consider setting up automatic payments or reminders. Being punctual with your payments is key to improving your score.
2. Reduce Your Credit Utilization Ratio
Credit utilization refers to the percentage of your available credit limit that you’re using. A high ratio can negatively impact your score. Try to keep your credit utilization below 30%. For example, if your credit limit is ₹1 lakh, aim to use no more than ₹30,000. If you’re frequently exceeding this limit, request a higher credit limit from your lender. This will help improve your credit utilization ratio and, in turn, your credit score.
3. Plan Your Spending Carefully
Multiple credit inquiries can lower your credit score. Applying for new loans or credit cards within a short period can make you appear credit-hungry, which negatively impacts your credit score. It’s important to plan your spending and avoid unnecessary credit inquiries. Lenders will view your credit profile more favorably if they see that you’re not over-relying on credit.
4. Regularly Monitor Your Credit Report
Mistakes on your credit report can lower your score, even if you’ve been diligent about making payments. Errors like incorrect loan statuses, fraudulent accounts, or wrong transactions are not uncommon. It’s your responsibility to check your credit report regularly. You can get one free report per year from major credit bureaus like CIBIL, Experian, or CRIF Highmark. If you find any discrepancies, contact the relevant institutions to dispute them.
5. Build a Longer Credit History
Your credit history length also plays a role in your credit score. Older accounts show lenders that you have a stable financial history. Keeping old credit accounts open and active, even if you’re not using them, can improve your credit score. If you’ve been making timely payments on credit cards or loans for years, it signals to future lenders that you are a reliable borrower.
Expert Tips for Success
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Start Small: If you’re new to managing credit, start with one or two credit accounts and use them responsibly.
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Avoid Missing Payments: Set up reminders or automatic payments to ensure you never miss a due date.
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Request Credit Limit Increases: If your spending tends to go above the 30% mark, request a higher limit to keep your utilization ratio in check.
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Be Patient: It takes time to improve your credit score, so focus on consistency over time.
Improving your credit score from 650 to 750 is not an overnight task, but with dedication, it is achievable. By consistently paying your bills, keeping credit utilization low, monitoring your credit report, and building a long credit history, you can unlock better financial opportunities. Stick to these practices, and your credit score will gradually rise.
