Having a good credit score goes a long way. A good credit score could help you have a smooth financial life. Especially with financial products like credit cards, mortgages, car loans, and other financial products, wherein an industry report says almost 6 out of 10 millennials are rejected.
Having said that, there are various things to look at. For instance, simply looking at ways to improve your credit score affected due to loan defaults might not be the right approach for you.
Anurag Sinha, Co-founder and CEO, OneScore and OneCard, explains, “There are different types of errors and discrepancies that usually go unnoticed by users, that affect their credit score.”
The most common errors in credit reports are the clerical errors – typos or incorrect credentials in one’s details inclusive of misspelt names, invalid phone numbers etc. Likewise, Sinha points out, “there are chances that one’s identity has been confused with another customer with a similar name. These errors may sound trivial but may have serious implications in the future. Therefore such errors should be corrected immediately to avoid future hassles.”
Also, ensure to update your information about your name, address etc. while shifting to a new location.
According to Sinha, this takes place when your account status is reported incorrectly. If not paid immediate attention, it might severely lower your credit score.
There are certain scenarios under which it can happen;
- When closed accounts are not updated in the financial institution’s data-based and, hence, continue to be reported as open.
- Accounts are wrongly reported as late or delinquent
- Same debt listed more than once (possibly with different names)
How to improve your credit score?
Having said that, there are also certain things that you need to keep in mind while making payments, which could lead to credit score improvements.
For instance, Sinha says, “timely paying EMIs and credit card dues is very important as it can significantly improve one’s credit score. Also, while paying credit card bills people often tend to pay just the minimum due, however, this affects one’s credit score in the long run.” To avoid that, try paying the entire due amount by the payment date.
Also delayed payments can prove to be an expensive affair as banks or lending organizations generally charge heavy interest rates on the due amount post the due date. Sinha, therefore, advises, “set reminders or even give standing instructions to banks for auto-debit of EMIs to avoid any such incidents.”