The credit score doesn't have to be above 750 to apply for new loans. The credit score is estimated between 300 and 900, while the score above 750 is considered better. However, many people still don't know how to make credit scores better. Those whose salary is low can also make credit scores better. Sometimes individuals make some silly mistakes that cause their credit score to be negatively affected. Know about some of these mistakes, and how you can avoid it.
1. Default in loan payment: Not paying EMI of your loan on time will reduce your credit score. Sometimes, we fail to pay by credit card within the due date due to which the bank imposes a fine. It has a serious impact on credit scores. Even if you do not have money problems, banks would agree that you cannot pay credit cards due to the paucity of funds. Therefore, pay the loan installment on time.
2. Taking too much credit: If you take a lot of unsecured loans such as credit card dues, personal loans, it will affect your credit score. A large amount of unpaid dues increases the risk of default. If your monthly debt repayment (interest and principal on all loans) exceeds 50% of your home salary, it will reduce your credit score and show that you are a weak customer and can default at any time.
3. Excessive use of credit cards: This will negatively affect your credit score if you often use the maximum credit limit across all your cards. According to experts, maintaining a credit usage ratio (CUR) of less than 30% is always advisable for good credit scores.
4. Applying for too many loans: Sometimes, people apply for loans with multiple banks to reduce the likelihood of loan rejection together and get a much better rate while buying a property. However, they should note that every time they apply for a loan, the rest of their credit history is also known.
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