If your credit score has taken a hit recently, don’t worry—it’s not the end of the road. There are simple steps that can help you get back on track. Many people face credit score issues, often due to unexpected financial troubles. This is quite common, but it’s important to fix it quickly, as a bad credit score can create problems in the future, like difficulty in getting loans or even credit cards. The good news? You can improve your credit score with a few easy actions.
Be Smart About Credit Card Usage
One of the main reasons credit scores get damaged is improper credit card usage. Many people make the mistake of paying only the minimum amount on their credit card bills. This might seem like a good idea at the moment, but it increases your credit utilization ratio, which negatively affects your credit score. Ideally, you should aim to pay off your credit card bill in full every month.
Why does this matter? Credit utilization makes up around 30% of your credit score. Keeping your balance low and paying your bills on time will have a positive effect. Also, remember to pay EMIs on any personal loans or other debts on time—this helps a lot in improving your score.
Consider Credit Piggybacking
If you’re looking for a quicker way to boost your score, credit piggybacking could be an option. In simple terms, it means using the credit card of a trusted family member with a good credit score. Of course, you’ll need their permission for this, but it’s a useful way to build or improve your credit score. Essentially, when you piggyback on someone’s credit account, their good credit history can help improve yours.
Talk to Your Bank for Help
If you’re struggling to pay off any loan or credit, it’s a good idea to talk directly to your bank. Many people don’t realize that banks are often willing to help their customers who have been in good standing but are going through temporary financial difficulties. If you explain your situation, they may agree to remove a negative entry from your account, or offer a solution to avoid damaging your credit further. This is an effective but often underutilized method to improve your score.
Make Use of Alternative Data
If you don’t have a long credit history, don’t worry—there are other ways to improve your credit score. Banks and credit bureaus like CIBIL are increasingly looking at alternative data, such as utility bills, rent payments, and even your overall bank account activity, to assess your creditworthiness. This can help you build a good credit profile even if you haven’t used much credit in the past.
Choose Loan Restructuring Over Settlement
If you’re buried under a lot of debt, you might be tempted to settle your loans with the bank. While this option clears your debt, it comes at a heavy cost to your credit score. Instead, consider loan restructuring. In a restructuring plan, the bank gives you more time to repay the loan, without wiping it off the books. This way, your credit score doesn’t take a hit, and you get some breathing room to sort out your finances.
Loan restructuring is a more positive approach than settling debts, as it doesn’t mark you as a risky borrower to future lenders. According to the Credit Bureau Association of India, people who opt for restructuring are 35% more likely to successfully repay their loans compared to those who settle their debts.
By following these simple steps and being proactive about managing your finances, you can start improving your credit score today. Whether it’s by using your credit card smartly, paying off loans on time, or seeking help from your bank, there are plenty of ways to make sure your credit score gets back on track.
