How to raise your credit score?

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How to raise your credit score?

How to improve credit score
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  • Debt-to-income ratio is a key indicator of earnings and spending
  • Credit score can be improved by making good the delinquencies, for which you may need to earn extra
  • Investing prudently in a few large-cap blue chip companies may be considered to increase income

There is no easy hack to raise the credit score. But a persistent approach may help.

Debt-to-income ratio

Understanding your debt-to-income (DTI) ratio is critical here. A high DTI emphasizes the need for immediate action such as reducing mortgages and cutting back on unnecessary expenses. Reducing the mortgage loan can come with refinancing the current mortgage. Unnecessary outlays may include not using the cheaper public transport when it is easily available.

Making some quick fixes

Get a handle on what your credit looks like by accessing the full credit report. List out all accounts and cards in delinquency or collection mode and sort it out by either paying off or extending the mortgage tenure. Negotiate with the credit institutions and loan companies to strike off some late payments, if possible. This alone can marginally improve your credit score.

Next, ensure no payment is delayed and avoid applying for lines of new credit. Holding multiple cards or procuring new loans can lead to a vicious circle of debt piling.

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Generating some income from existing wealth

It’s never a bad idea to make money from the cash lying idle in the savings account with the bank.

Though there are many conventional options like term deposits and retirement plans to park money in, a few not-so-conventional assets, because of their variable returns, may be preferred. The best among these is investing in the stock market.

Did you know that the S&P 500 Index gained approximately 27 per cent in 2021? The index, which comprises of stocks from varied economic activities including software and car manufacturing, can be tapped for a few extra quick bucks to repay the pending dues on any loan or credit card.

Return of S&P 500 Index in 2021

Data provided by

In Canada, benchmark index TSX Composite gained almost 20 per cent last year. The index touched new scales during the year despite weak macroeconomic indicators of the country amid the pandemic.

Also read: As we enter 2022, know how Bitcoin compares with the US dollar

Bottom line

Knowing your debt-to-income level, which can change over every few months, is extremely important. This can give you an idea about your impulsive spending and/ or subdued income. The US is a diverse economy with diversified spending patterns. But the suggestion to raise credit score remains universal in nature: perseverance and a debt-free approach.


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