Whenever you are applying for any loan or credit card, the lending institution first sees your credit score before approving the loan or credit card. That means you must have a good credit score. But what is a credit score? It is the measurement of your creditworthiness. Credit score gives the record of your existing debts and your repayments against the debts. If you maintain a good credit score/CIBIL score of 750 or above, it will help you to get a loan without any hassle that too at a lower rate of interest. 

Here are some effective ways to improve your credit score-

• Periodically check your credit score– It is always advisable to check your credit score on a periodic basis. In this way, you can check the credit report and can report to the bureau in case of any mistakes which might lower your creditworthiness. 
• Proper credit card usage– If you use your credit card properly and pay off the bill within the interest-free period, then your credit score will improve. But do not overuse it. 
• 30%-40% credit utilization ratio– The portion of the credit card limit that is used is the credit utilization ratio. Always keep your credit utilization ratio up to 30% to 40%. If you exceed that limit, you seem to be credit hungry which will lower your credit score. So, always limit the credit utilization ratio up to 30% to 40%.
• Avoid multiple loan application– When you are applying for a personal loan, do check the eligibility criteria beforehand. Try to avoid multiple applications in different banks. Multiple loan application will reduce your CIBIL score which will lower your loan repaying capacity.
• Good credit mix– Try to maintain a proper credit mix of unsecured and secured loan. If you have a higher share of the secured loan than an unsecured loan, then lending institutions do not feel hesitant in giving a loan. Moreover, it also improves your credit score. Also, you can prepay your unsecured loan which will also increase your credit score.
• Any existing liability- The most efficient way to improve your credit score is that just pay off your loan EMI or credit card bills on time. If you pay your existing liability on time, it will increase your credit score and will enhance your creditworthiness. A good credit score helps in gaining the trust of the lending institution.
• Direct inquiries– Lending institutions fetch credit report from the concerned bureaus whenever you apply for a credit card or loan. The lender initiated credit report is taken as hard inquiries which lower down your credit score. Instead, you can go for an online marketplace where you can choose the lender which matches to your eligibility criteria and financial requirements. When the online platform enquires credit report, it is taken as soft inquiries which do not lower the credit score.