As Christmas is around the corner, it’s time to celebrate and exchange gifts with friends and family. Just like you expect to receive lovely gifts from your loved ones, your credit score too expects the joy of presents. So instead of ignoring your credit score, give your credit score the perfect Christmas gift by playing secret Santa. Here are some tips on how you can be the secret Santa to your credit score:
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It is not wise to buy gifts for people that they already have. Therefore you need to find out what your credit score is lacking and how your score can be improved. You can do this by going through your credit report and checking for errors and mistakes.
While computing your credit score the credit agencies consider various parameters to evaluate your score. In general, there are four main factors that affect your credit score. They are – repayment history, credit utilization ratio, credit history and credit mix. Many a time’s people rely on a single type of credit to upgrade their credit score. However, it is important that a single type of credit will not help you attain a good credit score. To achieve a good score you need to find out what’s lacking in your credit report and how you can incorporate changes to improve your credit score.
See Also: Check Credit Score Online
Now that you have understood how your credit score is computed, you have a better idea of what your gift can be. Let’s say, your credit portfolio contains a mix of secured and unsecured loans and until now your credit score was computed based on the repayment of these loans. Since your credit profile is missing score based on credit utilization ratio, you can subscribe to a credit card as a measure to further improve your score.
Using a credit card responsibly will prove that you are able to handle your finances efficiently and it will positively impact your credit score. Credit mix consists of 10% of your credit score while the credit utilization ratio impacts one-third of your overall credit score.
Now that you are aware of the changes you need to implement, make sure to time your gift perfectly so that you can avoid hurting your credit health. For instance, if you want to subscribe for a credit card, make sure to apply for it when you have an excellent credit score. In case if you apply for a credit card when the chances of rejection are high then you may end up hurting your credit score badly. Hard enquiries conducted by banks and consequent rejection of credit application may further deplete your credit score. so it is wise to take such decisions when the time is right.
See Also: Credit Score India
There no price tag to the joy you can offer on someone’s face through a lovely gift. Once you have gifted your credit score with the right changes, don’t just disappear into thin air. Check your credit score regularly and you can see the positive changes and the cheerful credit score flashing on your laptop screen.
There are several reasons why you should have a good credit score. Listed below are some of them:
1. Loans: Banks and other lending institutions conduct a thorough enquiry about your credit score while determining whether to sanction loans to a borrower or not. A good credit score reflects how responsible you are in managing debt. A good credit score instils guarantee about your loan repaying capacity.
2. Credit cards: Banks go through your repayment history and your credit score before approving your credit card application. A good credit score increases your eligibility for getting a new credit card.
3. Rate of interest: With a good credit score you can avail better interest rate on loans and credit cards. A good credit score places you in a position to negotiate the terms of your loan.
4. Higher limits: A good credit not only help you get loans quickly at good rates but also qualifies you in getting higher loan amount and higher credit limit on your credit card.
5. For availing loans in future: Make sure to maintain a good credit score for availing a loan in the future. A good credit score will come in handy when you apply for a loan in future.
See Also: Free Credit Score
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