How to get a perfect credit score: 4 steps in brief

Credit score gets impacted primarily on your credit history. Check if your monthly payments towards loans are reflected on your credit reports. An ideal way to not miss payments and become a defaulter is to keep reminders on your Equated Monthly Installments (EMI). You can also opt for ‘auto-debit’ facility, wherein the lender automatically deducts the EMI amount from your bank account on a specified date. But make sure that you have funds in your account.

You should first obtain your credit score and report from one of the authorised four credit bureaus. You can start evaluating where you stand with respect to credit in the following ways. Representational image, source: Reuters

Your credit score is a measure of how you have performed on your loans and credit card bills in the past. A good credit score is an indication of good credit behaviour. Looking at your credit report would give the full picture of your credit health. But if you are looking at a credit score for the first time, or don’t know how to evaluate your credit score and report, here is how to go about it.

You should first obtain your credit score and report from one of the authorised four credit bureaus. You can start evaluating where you stand with respect to credit in the following ways.

Default on earlier payments
Credit score gets impacted primarily on your credit history. Check if your monthly payments towards loans are reflected on your credit reports. An ideal way to not miss payments and become a defaulter is to keep reminders on your Equated Monthly Installments (EMI). You can also opt for ‘auto-debit’ facility, wherein the lender automatically deducts the EMI amount from your bank account on a specified date. But make sure that you have funds in your account.

Credit portfolio mix
Having a mixture of both secured and unsecured credits is an important factor in the computation of your credit score. It shows your mettle in handling multiple credits efficiently. Lenders usually prefer candidates who are familiar with all types of credit. A portfolio that consists of a secured loan, such as a home loan, and is balanced by an unsecured credit like a credit card, adds immensely to your credit score.

Amount of credit
If you already have a number of new credit enquiries in the form of loan and credit card applications against your name and if these are hard enquiries, then the bank would consider you to be credit hungry or someone who wishes to get more credit than you can handle. You would do well to avoid hard enquiries beforehand by checking eligibility for the loan product that you wish to apply for.

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Update your information
Often a low score could be due to errors on your credit report. Mis-reporting happens more often than you think, and such information could potentially harm your credit score. Raise such errors on the report with the respective credit bureau and get them corrected. Usually, erroneous information like incorrect personal details, account balance can be disputed.

(The writer is the CEO of CreditMantri.com)

Source: DNA Money

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