Having a good credit score is extremely critical. It works as a key factor for banks and financial institutions while providing you with a loan or a credit card. But the burning question is how to improve your credit score? In this article we will give you some of the easiest and most effective tips to improve your credit score.
The score is generated based on an individual’s credit repayment behavior over a period. All of us need to maintain a healthy credit score as it determines our borrowing capability. A healthy credit score would be in the range of 700-900 depending on the credit bureau. Generally, all lenders look at credit scores and credit reports before giving out any credit product, be it secured or unsecured. Maintaining a healthy credit score also gets you a lower interest rate on your loans.
What is a Good Credit Score?
A credit score is a 3 digits numeric number ranging from 300-850. It is assigned to every individual who has availed of a credit product. Credit score of an individual is determined based on their credit/loan behaviour.
While there are many credit information companies in Nigeria, the most popular one is CRC Credit Bureau. CRC assigns
The score is generated based on an individual’s credit repayment behaviour over a period. A healthy credit score would be in the range of 700-850 depending on the credit bureau. Most lenders look at credit scores and credit reports before giving any credit product. Maintaining a healthy credit score also gets you a lower interest rate on your loans.
Easy Tips To Improve Your Credit Score
One of the most important indicators of your financial health is your credit score. It tells lenders how responsibly you use credit in a glance. The higher your credit score, the easier it will be to be approved for new loans or lines of credit. A higher credit score can also help you get the best available interest rates when borrowing.
If you are wondering how to improve your credit score, there are a few simple things you can do. It takes some effort and of course time. Below we discuss how you can improve credit score.
- Paying loan /credit card bills on time
One of the most important factors in determining your credit scores is your payment history. Having a long history of on-time payments can help you achieve excellent credit scores. To achieve this, you must ensure that you do not miss any loan or credit card payments for an extended period of time. If you pay your loan or credit card bill on time, your credit score will be healthy over the period.
- Never pay just the least amount due
You should make payment of your credit card bills either in full or at least pay more than the least due amount. Paying the least due amount reduces your chance to improve your credit score.
● Maintain Credit Card Limit Utilization Below 60-70%
People often wonder “how to improve my credit score”. To improve your credit score you must avoid utilising your credit card limit to its fullest. It impacts your credit score negatively. Suppose you utilise the limit completely. In that case you should ensure that the payment is done in full/part to bring the limit utilisation down to 60-70%.
- Check Your Credit Report Regularly
Checking your credit report is one of the most important things to improve credit score. This will assist you in locating errors in your report. If you discover errors in your credit report, you must correct them right away. The credit score is calculated based on the information in the credit report. Therefore, you must ensure that this report is error-free.
- Avoid Unnecessary Inquiries For Loan/Credit Card
There are two types of inquiries that can be conducted:
- Hard inquiries
- Soft inquiries
When you check your own credit, this is referred to as a soft inquiry. Soft inquiries occur when a potential employer checks your credit. It can also occur when financial institutions (with whom you already do business) check your credit. Soft inquiries have no impact on your credit score.
When you apply for a credit card or a loan, you will be subjected to a hard inquiry. Hard inquiries that occur on a regular basis will not affect your credit score.
Applying for a loan from many lenders creates a footprint on the credit report. Many inquiries at credit bureaus for a loan within a short period will negatively impact your credit score. You should not keep looking at loan/credit card options unless it is necessary.
- Good Mix Of Credit Product
Always maintain a good mix of both secured and unsecured loans. A good mix improves the chances of having a better credit score. Although, having too many unsecured loans should not be preferred.
- Monitor your Credit Score
Sometimes, you might receive a wrong credit score or there might be a mistake in your CRC report. It is always recommended to check your credit score well in advance. This is because there is no way you can correct the report at the last minute.
You should keep looking at your credit bureau report periodically for any wrong reporting done by lenders. If you want to figure out how to improve your credit scores in Nigeria this practice is a must. If you find any wrong reporting you should take your concern to credit bureaus for correction.
To summarise, you should always repay the loans/credit card on time to have a good credit score. Missing your loan repayment can lead to a very poor credit score. Even multiple outstanding loans can affect your credit score. So, you should always clear your loans/credit card bills to avoid paying high rates of interest.
