First of all, one needs to check the credit report, clear overdue payments, use the credit card responsibly, maintain a healthy mix of credit, avoid too many new applications, and keep old accounts active.
Here we explain these points in detail:
I. Check the credit report: At the outset, one must check the credit report and spot for any inaccuracies. You can write to the credit information company to make a relevant change in the credit report.
II. Clear overdue payments: A low credit score usually stems from overdue payments. So, the dues must be cleared first of all.
III. Use the credit card responsibly: Using a credit card responsibly is quite important for a healthy credit score. Typically, the credit utilisation ratio should be 30 percent or lower.
IV. Maintain a healthy mix of credit: Credit information companies tend to prefer a wide mix of credit, including secured and unsecured loans such as credit cards and personal loans. So, if you only have credit cards, you should also take a secured loan (e.g., a loan against an FD) to diversify.
V. Avoid too many new applications: Each credit card application leads to a hard inquiry, thus lowering your score. This ought to be avoided at all costs.
VI. Keep old accounts active: One should avoid closing their old credit card account. A longer credit history leads to a higher score.
Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
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