Ways to Improve Your Credit Health in 2015

Whether you are planning to buy your dream home or any other consumer product, it is your credit score which ultimately determines your credit eligibility.

A credit score is a 3-digit number that shows numeric summary of your credit health and is derived by credit bureaus like CIBIL, Equifax, and Experian by analyzing your credit history, which is a record of how you have used and managed credit in the past.

According to industry experts, the score usually ranges from 300 to 900 points, and the higher the score, the more is the chance of getting your loan application approved. "A score above 700 usually suggests good credit management, but every bank has its own criteria of determining the credit worthiness of an individual," says one of the credit health improvement companies.

How to improve your credit score in 2015

You can boost your credit score by following some simple tips:

Get Your Credit Report

Credit score repair begins with your credit report. The first thing to do, therefore, is to request a free copy of your credit report and check for errors. Make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. Resolve the errors with the credit bureau and reporting agency.

Pay Your Bills on Time

Many people are not aware that simple tasks like paying bills even phone bills on time can play a very important role in improving your credit score. Your payment history on your credit health report makes up almost 35 per cent of your total score.

Pay Off a Debt

Another easy method to improve the credit score is to start paying off older loans or debts, even if the debt amount is small. Minimization of outstanding debt helps to improve the credit score.

Less Credit Cards and Less Use

Although a credit card can make you eligible for loans, having numerous credit cards and making huge purchases with them can reverse the situation. Ideally, spend between 10 and 20 per cent or less of the total credit available.

No Credit Card Default

Another important measure to improve credit score is to pay down the credit cards and avoid credit card default. You should maintain the balance on each credit card at least 30 per cent below the credit limit.

Timely Payment of EMIs

Pending loans and debts have an impact on credit health and it is important to pay them back on time. People hopping to raise a new loan must pay the EMIs on time. If you are responsible and punctual with your current loan payments, it will surely improve your credit score.

Don't Close Unused Credit Card Accounts

A closed account will still show up on your credit report, and may be considered in the score. Cancelling a credit card can actually lower the credit score. So, a better strategy is to occasionally use older credit cards so the issuer doesn't stop reporting the information to the credit bureaus.

No New Credit Card Purchases

Applying for a new credit when already incurring a bad credit score is a bad idea. New card purchase will raise the credit utilization, which is the ratio between credit card balances and credit limit. The higher the balance, the more dent to the credit score. Therefore, it is advisable to pay cash during purchases instead of putting them on credit. Lowering balances help improve the credit score.