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How Often is Your Credit Score Updated?

IndianMoney.com Research Team | Posted On Tuesday, April 30,2019, 06:38 PM

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How Often is Your Credit Score Updated?

 

 

How Often is Your Credit Score Updated?

What is Credit Score?

Credit score is a three digit summary of your credit history. Credit score is a number in the range of 300 to 900. If you have good repayment history, then you can expect your credit score to be high. If not, then it would be low. Most banks check credit score when you apply for a loan. Lenders might reject your loan application if your credit score is low.

How Long Does it Take to Improve your Credit Score?

It totally depends on you. The easiest way of improving your credit score is by availing secured credit cards and repaying regularly. The credit score is not going to improve in a matter of a few days. It would certainly take a few months, if not more. Both improving and hampering credit score are in your hands. If you have handled debt wisely, then you wouldn’t have been in this situation of having a bad credit score. If you have a bad credit score, then you have no one to blame but yourself. Individuals with bad credit scores are not granted unsecured loans. They must furnish a security or collateral in order to get loans.

You need to understand that there are many reasons apart from defaulting that cause your credit score to go down.

See Also: 6 Reasons Why You Should Check Your Credit Score

What are the Factors Involved in Credit Score Changes?

  • Payment History: This is the most important parameter that affects the credit score. If your repayment history has no hiccups, then your credit score would be high. If you have defaults, late or missed payments, write-offs and settlements, then your credit score would be low. Longer the repayment history, better would be the credit score. Hence, if you have old credit cards, then it’s advisable to start reusing them as they have longer repayment history and would have positive impact on credit score. (Don’t close old credit cards).
  • Credit Utilization: Try and maintain your credit utilization limit ratio to less than 30. If you have a credit card with credit limit of Rs 1 lakh, then you must ensure that you use only Rs 30,000 credit limit (30% of credit limit). Credit bureaus consider you to be credit hungry if your credit utilization is high.
  • Length Of Credit History: Longer the credit history, higher would be the credit score. If you have recently availed loans and credit cards, then you must wait to know the impact of them on credit score. Considering this, it is advisable to start reusing old credit cards that are lying dormant. 
  • Credit Mix: If you have availed different types of loans, then it is going to have a positive impact on your credit score. Instead of always availing credit cards, you must consider other options like loan against security. If you have availed home loans and car loans, this is good for credit score.
  • New Credits: If you have availed loans and credit cards recently, then you must wait for at least 6 months to know the impact on credit score. Don’t apply for multiple loans as it would have a negative impact on credit score. Credit bureaus consider you to be short on cash and desperate for financial support when you are applying for too many loans.  
  • Number of Inquiries: If you check your own credit score, it is called soft enquiry and these enquiries have no impact on your credit score. When you apply for a loan, the lender checks your credit score. This is called hard enquiry and these enquiries have negative impact on credit score. Too many hard enquiries are considered a red flag and shows you to be credit hungry and hence has a negative impact on credit score.

If you have recently done something that hampers credit score then, you would have to wait for some time to understand the impact. 

The table below shows the average time to recover from a jolt on credit score due to various reasons:

Action

Average Recovery Time

Credit Score Impact

Applying for Credit

3 months

Minor

Closing an Account

3 months

Minor

Maxing Out a Credit Card

3 months

Moderate

Missed Payment / Default

18 months

Significant

Bankruptcy

6+ years

Significant

How Often is Your Credit Score Updated? Does Credit Score Fluctuate Each Month?

All banks are mandated by RBI to share credit information on a monthly basis with all four RBI authorized credit bureaus. Hence, your credit score is updated each month.

How to Improve your Credit Score in 12 months?

Following are few of the steps that help improve credit score in 12 months:

  • Clear long pending outstanding loans.
  • Start reusing old dormant credit cards. This increases the repayment history which is good for the credit score.
  • Reduce your credit utilization ratio as much as possible.
  • Pay your EMIs regularly.
  • If needed, apply and use secured credit cards wisely.
  • If you find any discrepancies in the credit report, then you must raise a dispute immediately with the concerned credit bureau.

See Also: How To Check Credit Score?

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