8 SMART Ways to Increase Your Credit Score

As you know, a credit score is a statistical number that represents how you have used credit over a period of time. It is important to be consistent in your credit repayments to have a good credit score. A high credit score increases the probability of getting credit/loan easily as it indicates to lenders that the probability of you repaying a loan is higher. Good Credit Score becomes even more important because interest rate that you pay on any loan, can also depend on your credit score. 

Ways to Increase Your Credit Score

Smart ways to increase your Credit Score:

1. Clean up your credit report –You should apply for a credit report to check your score regularly. Many times there are errors in the report, which will lead to an inaccurate score. Removal of mistakes will improve the credit score.

2. Automate your payments – We have a busy life and we might miss paying credit card bills or mobile phone bills. You should therefore automate payments. Most banks have this facility now. There are many software tools and mobile apps available as well to keep track of payments or you can use good old calendar reminders.

3. Use credit cards- It is advised that credit cards should be used only for emergencies but from a credit score perspective; do use your credit card once in a while. This helps in many ways. The card remains active and repayment behaviour is reflected on your credit score. If the credit card gets cancelled due to inactivity, the good record of that card will also be lost. Read: 7 Costly Credit Card Mistakes Almost Everyone Makes

4. Use old cards first – You get tempted to get a new credit card looking at the offers and reward points. But before you get the new card and leave your old credit card unused, do remember that the proverb, ‘Old is gold’ holds true for credit cards. Older cards have a longer history and a history of good payments increases your credit score.

Many people also think they can improve their credit score by closing old unused credit cards, but this is not necessarily the case. Open sparingly used credit cards actually help improve your score as it shows that you have a high credit limit and low credit utilization. You need not use the card very often too. Using it once in a while will ensure that it stays on the credit report.

5. Old loans should be seen in the credit report – Do you remove the names of companies that you had worked with when you join a new company from your resume? You don’t as they offer an insight into your experience and expertise. Similarly, a longer history of good repayment practices will help increase your credit score. In case if you are planning to prepay some loan – go for newer one. 

6. Behaviour indicating credit risk should be avoided – You should always be aware of your actions around credit. If you do something out of the ordinary like missing a credit card payment or reducing the monthly instalment on a loan or taking an advance on your credit card, it sets the alarm bells ringing and credit issuers can associate this with money troubles.

7. Get the Settlement Certificate – In some cases, even after you make a payment or you default on a loan but settle it after the due date, the lender does not update the records. You find your name is still present in the defaulters’ list of the Credit Bureau. You should send the ‘No Dues’ or ‘Settlement’ certificate to the lender. The bank would have issued this to you when you made the payment. The lender would then inform the Credit Bureau accordingly.

8. Be Fastidious – Do not agree to be the guarantor for anybody’s loan. If that person defaults on the loan, your credit score will be affected negatively. Conduct a due diligence on the borrower and guarantee loans selectively. Read: Top 10 credit score myths that need to die

Few basic Rules – from Cibil

  • Rule 1: Always pay your bills on time.
  • Rule 2: Keep your balances low.
  • Rule 3: Maintain a healthy mix of credit. Your credit history should contain a mix of a home loan, auto loan and a couple of credit cards.
  • Rule 4: Apply for new credit in moderation. (don’t show you are credit hungry)

If you would like to read more about reducing liability or strategies to get out of debt trap – you will find that in my book Financial Life Planning – solve your biggest puzzle”.

It is important to have a high credit score so that you get credit easily when you most need it & at lower rates. Please share your experience & experiments with credit score – hope that will be helpful for TFL readers.

Image courtesy of renjith krishnan / FreeDigitalPhotos.net
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Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice & TFL Guide Blog in 2009. "The Financial Literates" is a dream & mission to make Indians Financial Literate.


  1. ‘higher credit limit but moderate to low usage’ and ‘old is gold’ would be my direct takeaways. one of the links did quell the myth that the rating would come down for every status enquiry. thank you so much.

  2. 1. Clean up your credit report
    Where do I get my score? glad to have it for free ;)?

    7. Get the Settlement Certificate
    – How would I check whether my loan bank/Creditcard bank updated my score properly
    – If I call bank customer care what I have to ask them about this score updation?
    -I just finished up one of my consumer loan (repaid timely), so my score will increase or decrease or stay as it is ?

    • Abhisheka,

      1. You can get fit from CIBIL but its not free yet

      2. You need to check it with CIBIL report

      3. Till you are paying your dues timely your score will keep on improving.It decreases only when you default.

  3. “Your credit history should contain a mix of a home loan, auto loan and a couple of credit cards”

    LOL. dont get any loans. credit score is a trick to make you get more loans. you wont invest in company that has more liabilities in balance sheet. sameway dont get into loans

  4. How I can show my credit scores. I have 2 loans one is personal loan and another is Consumer durable loan from Bajaj Finance. The consumer durable loan has already been paid and I got the NOC from Bajaj Finance. How it will effect my future loan prospect. Pls reply via E-mail Notification at the earliest.

    • What this implies is that if you have more than one loan outstanding, and have surplus funds available with which you can choose to close one of the loans, close the newer one, if you intend to raise your credit score. The older the loan ( with a history of EMIs paid on time), the better your credibility to service a loan

  5. Hi,

    Some one told me that to get a loan(any), one should have some past loan taken records….this helps us to get new loan easily.

    I have never taken any loan or credit card, Is is important to have any of these.

    Will i get any problem while taking any loan in future….

  6. Sir, I have no loan,no credit loan and nothing wrong from my side . but my score is not enough for loan . I got 745 point only. i am a railway employee .

  7. I need to know whether the MUTHOOT FINANCE is a part of CIBIL, if I fail to make the payment for the mentioned finance, would that affect my CIBIL scores, Because I haven’t submitted my A/C or PAN details with them, then how it may affect my CIBIL scores. Please reply back to my E-mail address at the earliest.

  8. Hi, very informative article. I am also suffering from bad cibil score and after reading your blog I got clear idea of what impacts it. Thanks 🙂

  9. I need to know whether the MUTHOOT FINANCE is a part of CIBIL, if I fail to make the payment for the mentioned finance, would that affect my CIBIL scores, Because I haven’t submitted my A/C or PAN details with them, then how it may affect my CIBIL scores. Please reply back to my E-mail address at the earliest.


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