How long does it take to improve credit score: With disciplined credit habits and a focus on building good credit, you can gradually raise your credit score over time and reach a score of 750 or higher.
Credit scores depict the creditworthiness of a person, and lenders generally prefer customers with a score of 750 and above. However, the time to reach a credit score of 750 will depend on several factors, including your current credit score, credit history, payment habits, and overall credit utilisation.
If your score is between 650 and 700, you have a consistent payment history and low credit utilisation, it may take only a few months to reach a score of 750. However, if you have a poor credit score, missed payments, high credit utilisation, and derogatory marks on your credit report, it could take several years. Improving your credit score requires a consistent effort to pay your bills on time, reduce credit utilisation, and address any negative marks on your credit report. However, with disciplined credit habits and a focus on building good credit, you can gradually raise your credit score.
Adhil Shetty, CEO, Bankbazaar.com, says, “The widely acceptable benchmark of a good credit score is 750. If you score beyond that, lenders will like you. They will reserve the best loan offers, ones with the lowest interest rates, for you. If your score is low, you will pay a higher rate of interest. If your score is very low, your credit application may be rejected and you may not be able to take a new loan or credit card.”
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How a high credit score helps
Loan approval: Lenders, such as banks and credit card companies, use your credit score to evaluate your creditworthiness and decide whether to approve your loan or credit application. A high credit score can increase your chances of getting approved for loans and credit cards with competitive terms and lower interest rates.
Lower interest rates: A high credit score can help you qualify for loans and credit cards with lower interest rates. Often people with higher credit scores of 750 and above are considered less risky and financial institutions are happy to lend funds to such customers.
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Steps to reach a score of 750
It does not happen overnight. It is a process and you must follow financial discipline to reach a score of 750. Delays and defaults are a big no if you want to achieve a good credit score.
Check your credit report: Obtain a copy of your credit report from one of the four credit bureaus in India – CIBIL, Experian, Equifax, or CRIF High Mark. Review your credit report for any errors or discrepancies. Dispute any errors you find with the credit bureau.
Pay your bills on time: Payment history is the most important factor in your credit score. Make sure you pay your bills on time, every time. Set up automatic payments or reminders to help you stay on track.
Reduce your credit utilisation: Credit utilisation ratio (CUR) is the amount of credit you are using compared to your credit limit. Keep your credit utilisation below 30% to avoid negative impact on your credit score.
Maintain a mix of credit: Having a mix of credit, such as a credit card, personal loan, or home loan, can improve your credit score. However, don’t apply for too much credit at once, as this can negatively impact your score.
Avoid applying for too much credit: Applying for multiple loans or credit cards within a short period of time can hurt your credit score. Only apply for credit when you need it.
Don’t close old credit accounts: Closing old credit card accounts can lower your credit score, especially if they have a long credit history. Keep your old accounts open and active, even if you don’t use them often.
Avoid defaulting on loans: Defaulting on a loan or credit card can severely damage your credit score. If you’re struggling to make your payments, talk to your lender about your options, such as a payment plan or debt consolidation.
“There is no getting away from your credit history. Bear in mind, the credit score will only specify whether you repaid or failed to repay your loans on time. It does not take into account why you were late. You might have missed payments due to loss of income, a hospitalization or a lockdown. You might have been wilfully negligent and refused to pay despite having the means to. For the credit score, a late payment is a late payment regardless of your reasons,” explains Shetty.
A longer credit history can improve your credit score. Keep your old credit accounts open and active, even if you don’t use them often. You must be patient. Improving your credit score takes time and patience. Stay focused on building good credit habits, and over time, your credit score will improve.
REACHING 750
-The widely acceptable benchmark of a good credit score is 750
-People with this score are considered to be more credit worthy
-Payment history is the most important factor. Delays and defaults in payments are a big no
– Closing old credit card accounts can lower your credit score
