Have you ever taken your credit score seriously? Or try to understand the importance of it in your financial planning?

Well if you don’t, you must start now.

For starters, Credit Score is the calculation representing your credit risk at a moment in time, based on information found on your credit report. A credit score reflects credit payments pattern over time, with more emphasis on recent information. A credit score, in fact, is a 3-digit number that shows numeric summary of your credit health. So whether, you are planning to buy a home, car or any other product, or want to get a new credit card. Your credit score plays a major role in determining the loan eligibility, interest rate, and the credit limit.

Credit score majorly represents your ability to make loan payments on time and to manage overall credit. Used by lenders (bank, financial companies etc) to determine your creditworthiness of paying loan and keeping current on payments. In India credit score are calculated by credit information companies such as CIBIL, Equifax and Experian. The ideal credit score is 720-900, whereas poor credit score is 350-650. Understanding your credit is the first step towards building your financial future.

However, the concept of credit score in Indian has just begun. People are still not aware of it’s importance and outlay. According to survey conducted by CreditSudhaar.com, across 8 cities in India and sampled over 300 respondents, around 85% were not even aware of the implication of Credit Score. One out of four respondent is aware of credit bureaus in Delhi and Pune.

This explain the need for understanding the credit score and its working. So here are the ways in which you can monitor and revive your credit score:

1. Check Credit Score Report

With upgraded technology and World Wide Web, you can get all information regarding credit score and credit report analysis online with websites like www.creditmantri.com , www.creditsudhaar.com , www.freescoreindia.com etc. So the first thing to do is request a free copy of your credit report and check it for errors. With credit report you can breakdown the late payments, if any, or incorrect listing in accounts and the amount owed for each open account. Resolving these errors can revive your score.

2. Paying bills on time

Paying bills on time is the most important contributor to a good credit score. Even if debt you owe is a small amount (like timely pay of phone bill), it’s crucial that you make payments on time. If have trouble of paying the lump sum amount, then at least pay the minimum before the deadline. Roughly, 35% of your credit score is based on your payment history though there is no way to confirm since these are propriety algorithms.

3. Keep your low balance on credit card dues

Even though having a credit card can help you in being a qualified applicant for loans, however, owning many credit cards & making huge purchases with them can overturn the situation. Generally, you should try to make balances of credit card at least 30% below the limit. Bad score can be revived by reducing dependency on credit cards as well as avoiding having too many credit cards.

4. Pay off old debts

Fast payment of all old debts can help in reviving the credit score. Rather moving it around, old debts must be deposed off swiftly. Even debt amount is small, it’s essential is to get rid of it by making payment early or on time. Don’t lose track of small charges that can come back to affects to later. Moreover, pending loan EMI can impact your score as well. For improved score, it’s imperative to pay EMIs on time.

5. Don’t close old (Credit card) accounts

Closure of accounts is equally important in credit score, although no shown in credit report. It has a negative impact though, closing accounts also lowers your overall credit limits, which makes it look you’re closer to maxing out available credit.

Also applying for new credit card when already incurring bad credit score is terrible idea. It will raise credit utilization, which is the ratio between credit card balances and credit limit. Higher balance, major effect on the credit score. However, lower balance improves the score.

With even a few missed payments can reduce your credit score substantially making it harder to borrow money from lenders. By putting yourself on a strict financial diet, eliminating credit card debt and making payments on time, you will not only raise your credit score considerably, but you’ll reduce the amount of interest you pay every month; money you can devote of contingency plans.