Credit score below 650? These 4 simple moves could fix it faster than you think

A poor credit score can eventually make it difficult for you to secure new personal loans, credit cards, home loans and any other forms of credit at competitive interest rates. In modern finance, most lending institutions rely very heavily on an applicant’s credit profile.

They analyse credit profiles to assess an individual's reliability in meeting their debt repayment obligations. Furthermore, credit scores generally range from 300 to 900, and any score below 650 is typically considered poor.

Now, the good news is that with devotion, consistent financial discipline, and a strong financial foundation, you can strategically improve your credit score and build your credit profile. Given these factors, let us discuss this concept in more detail.

Understand what hurts your credit score

It is your responsibility to first identify the problematic areas and habits before fixing your score. Some of these areas are discussed below briefly:

1. When you delay personal loan EMIs, credit card bills or any other form of debt repayments, such a mistake can heavily influence your credit score.
2. When you use your credit card irresponsibly by maxing out your credit limit, this is a clear sign of financial stress for lenders. This is a common mistake that complicates future borrowing power.
3. When you submit too many personal loan, credit card, and home loan applications within a short span of time, this results in ‘hard checks’, i.e., ‘hard inquiries’. Such hard checks can temporarily lower your credit score.
4. When you ignore minor mistakes and discrepancies in your credit report. Such a habit can reduce your credit score and lead to the rejection of loan applications and the denial of other debt-related requests.

4 practical ways to improve your credit score

1. Ensure that you have a clean repayment history. To accomplish this, you should pay each EMI and bill on time. Across most scoring models, repayment history carries the highest weight.
2. Never cross 30% of your credit utilisation as a general norm. When you stick to a defined limit, it reflects responsible borrowing and composure on your part. This reflects positively with prospective lenders.
3. Be punctual and regularly check your credit report. This way, you can spot errors, outdated entries, and other issues early and resolve them amicably, maintaining a neat borrowing profile for years.
4. In case you have a very low credit score, i.e., any score of less than 650, you should then opt for a smaller or secured credit option, such as a fixed deposit-backed credit card, so that you can repay borrowed funds responsibly and reestablish your credit history and improve your credit score.

Improving your credit score is a slow, gradual process. It demands your devotion and sincerity. Following the above steps diligently and seeking guidance from a certified financial advisor when faced with any credit-related doubts can ensure that borrowing remains a pleasurable experience.

Disclaimer: MintMoney has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. MintMoney does not promote or encourage taking credit, as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.

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