Obtaining a high CIBIL score is often thought to be a daunting task. However, proper knowledge and preparation can make the process smoother, so you can get affordable loans and flagship credit cards.
It is not hard to check credit score online by either going to the credit bureau’s website or by availing free services offered by lenders and financial marketplaces. By checking your credit score, you can be informed about where you are and take the needed steps to improve or maintain your score.
A good CIBIL score is usually considered to be 750 or more. With a score like this, you can avail of credit at lower interest rates, get lifetime-free benefits on credit cards and enjoy pre-approved offers. All of this can help you save money and have a more affordable experience. In addition, a good score can help you get quick loans and of the amount that you desire.
A bad score, on the other hand, can lead to loan rejections, higher interest rates on loans, less choices when it comes to credit cards, and delay in processing your loan applications. Hence, having a good CIBIL score is beneficial for your financial well-being. Read on to know 9 tips on how to improve your CIBIL score.
Tip 1: Understand Your CIBIL Score
Your CIBIL score reflects your creditworthiness based on whether or not you repay your debts on time and a lot of other factors. A good CIBIL score shows that you are a responsible borrower, and lenders use it to determine your loan approval. So, understanding your CIBIL score is the first step towards improving it.
Your CIBIL score ranges from 300 to 900. Any score below 650 is not considered good. A score of 650 to 699 is considered fair, while a score of 700 to 749 is looked upon as above average. A good score starts at 750 and above. More than 70% of loans are sanctioned to those who have a CIBIL score of above 750.
You can check your credit score online for free or by paying a small subscription fee. Monitor it every 3-6 months if you plan to borrow credit in the near future and every year simply to maintain financial discipline.
Tip 2: Check Your Credit Report Regularly
Reviewing your credit report carefully is essential because your score is based on the information it contains. When you check your credit score, you will also be able to download and view this report.
Study it carefully as it has relevant information such as your:
- Personal and contact information
- Employment data
- Account information of every credit facility you have now and have accessed up to 3 years in the past
- Score inquiries from lenders
Ensure that the data it shows is accurate. For instance, does it show a loan account you have recently repaid in full as still open? If so, by identifying errors and reporting them, you can ensure that they are corrected. This can increase your credit score.
Additionally, checking your credit report can help you identify fraudulent activity, such as loan accounts opened in your name without your knowledge. Early detection of such activity can prevent further damage to your credit score.
Tip 3: Clear Your Credit Dues on Time
Paying your credit card bills and monthly loan instalments on time can affect your CIBIL score positively. This is the main criteria towards building a good CIBIL score. Late payments can negatively impact your score, and it can take you months to recover from the damage.
To avoid late payments, you can set up auto debits from your bank accounts or use other means such as digital reminders. When you are diligent with repayment, your credit score increases.
If you have any outstanding debts, you should prioritise them and pay them off immediately. This shows you are responsible and can handle debt effectively, which has a positive impact on your CIBIL score.
Tip 4: Lower Your Credit Utilisation Ratio
Your credit utilisation ratio is the amount of credit you use compared to your available or total credit limit. There is a negative impact on your CIBIL score if your credit utilisation ratio is high and vice versa.
Experts recommend keeping this capped at 30-40% of your total credit limit. For instance, if you have a credit card with a limit of Rs. 1 Lakh, you can use up to Rs. 30,000. This way, you can showcase that you are not credit-hungry, and this boosts your score.
Tip 5: Avoid Closing Your Old Credit Cards
One of the factors that impacts your credit score is your experience with handing credit. So, the length of your credit history matters. This is why not closing old credit cards is important. It showcases that you have maintained your credit record for longer, and this can positively impact your score.
Tip 6: Diversify Your Borrowings
Having a diverse credit portfolio can have a positive impact on your credit score too. This shows you can handle different types of credit responsibly. Lenders prefer borrowers who can handle secured and unsecured loans as well as credit cards and EMI financing. While you can do this if you get a chance, don’t go overboard and take on more debt than you can handle.
Tip 7: Avoid Applying for Multiple Loans or Credit Cards At Once
Applying for multiple loans or credit cards within a short period can negatively impact your CIBIL score. This is because lenders initiate a formal enquiry when you send in a loan or credit card application. This lowers your score a little, but many inquiries can lower your score a lot. Multiple credit enquiries are considered a red flag and may make you look credit hungry or a high-risk borrower. So, apply for loans after careful thought and only after checking the eligibility criteria.
Tip 8: Increase Your Card Limit
Increasing your credit card limit can positively impact your CIBIL score. A higher credit limit means more available credit, which can help keep your credit utilisation ratio low. However, using your credit limit responsibly and avoiding overspending is crucial!
Tip 9: Avoid Becoming a Co-Applicant
Becoming a co-applicant for someone else’s loan or credit card may seem like a harmless favour, but it can negatively impact your CIBIL score. If the primary borrower defaults on payments, it will reflect on your credit report, affecting your CIBIL score. Hence, only become a co-applicant if you are confident that the primary borrower will make timely payments.
To conclude, regularly check your CIBIL score, make timely payments, limit your credit utilisation, and maintain a healthy credit mix. Additionally, be patient, as improving your CIBIL score takes time. You can achieve a good CIBIL score and enjoy good credit health with effort and proper discipline. So, go ahead, implement these techniques, and watch your credit score soar!