Want to Improve Your CIBIL Score? Follow These Experts’ Tips
CIBIL score is one of the most important factors in determining the denial and approval of your credit application. Banks and financial institutions consider the credit or CIBIL score to evaluate the creditworthiness of borrowers.
A high score can get you loans faster and easier, saving you time and hassles. On the other hand, a poor CIBIL score (600 or below) can cause obstacles in getting your credit applications approved. Even if a loan application is approved, you need to pay a higher interest rate. In this post, you’ll discover the best tips to improve your CIBIL score and leverage excellent facilities in the future.
What is Considered a Good CIBIL Score?
A good credit score can help get a loan at comparatively lower interest rates and credit cards with additional benefits. There are different ranges of CIBIL scores created by India’s recognized credit bureaus. The CIBIL score between the 300-500 range is considered poor while when it falls between 550-650, it is found to be average. Anything from 650-750 is believed to be good. When it exceeds the value of 750 and goes closer to 900, it is deemed to be excellent.
How to Improve Your CIBIL Score and Get Loans Quickly?
1. Pay all your dues on time
If you used to delay your credit card payment or EMI payment, then you need to change this habit by clearing your payment on time. Get organized by strategically planning your dues and setting reminders for your payments. If you miss the due date, it might lower your credit score and require you to pay the penalty. Dues will be reflected automatically in your credit report under the Days Past Due (DPD) section. Pay your dues on time, especially the minimum amount to improve your CIBIL score.
2. Add standing instructions or set reminders
As mentioned above, missing out on EMI payments by the due date can negatively impact your CIBIL score. So, you need to be punctual to your dues. You can add Standing Instructions (SI) to your bank account or set reminders to repay EMIs on time. Be sure to add SI to a bank account from where a fixed amount shall be deducted monthly or specified duration regularly.
3. Focus on your credit utilization ratio
The usage ratio of your credit card can have a great impact on your CIBIL or credit score. Going beyond the set limit can lower your credit score. Thus, try to customize your credit use based on the allotted limit to improve CIBIL score by asking your lender for customization.
4. Apply for new and secured credit
If you are unable to exceed your credit limit, you can apply for a new credit card within your limit. You can avail a secured credit card against a fixed deposit and use it diligently, clearing your dues on time. Apply for new credit only when you really need it and you can repay it timely without lowering your credit score.
5. Regularly monitor your joint, guaranteed, and co-signed accounts
If you can’t meet some of the loan eligibility, your lender may ask you to get it guaranteed or co-signed by a co-applicant (guarantor) having good creditworthiness. This ensures that if you can’t repay the loan, the remaining amount can be repaid with the support of a guarantor. When a borrower doesn’t pay an EMI on time, the guarantor’s credit score can also take a hit. So, if you have a joint account or work as a guarantor or co-signer, regularly monitor the repayment of the EMIs to ensure it is done timely.
6. Avoid taking multiple loans at once
Use your credit strategically by avoiding taking too much debt in a fixed period of time. Never take multiple loans at once, instead, repay one loan and then go for borrowing another one to maintain your good credit score. When you borrow multiple loans at the same time, it will show you in an unforgiving cycle where you don’t have enough funds.
7. Check your CIBIL report for errors
There can be various unknown errors in your CIBIL report as CIBIL may make mistakes when updating records. For example, adding inaccurate collateral details or past dues against your report, incorrect personal data, mismatched paid-off amounts, etc. Thus, it is good to review your credit report frequently throughout the year and look for any possible errors. If you find such errors, get them resolved by raising grievances with CIBIL online.
8. Choose a longer repayment tenure
Choosing a shorter repayment tenure may help you pay less amount as interest in total but it will require you to pay heavy EMI every month. This may create difficulty in paying full EMI every month. So, choose a longer repayment tenure when you borrow any loan. Since it may require you to pay low EMI, you can make payments timely with no delay or skip.
9. Maintain older credit card accounts
Banks and financial institutions prefer applicants who have a longer age of good credit history. So, maintain your old credit cards as long as you can pay your dues on time. If you no longer use it now, you should avoid closing those credit card accounts.
10. Choose different types of credits
Your CIBIL score will be low if you don’t have a credit history. So, borrow and maintain a healthy mix of credit including secured (home loan) and unsecured loans (personal loan) of a short and long tenure. It will help you in developing a strong credit score. Avoid multiple unsecured loans as they may be considered negatively.
So, here are some useful tips you can follow to improve and maintain your creditworthiness and boost your chances of borrowing loans in the future with no problems. Remember that credit scores can’t be improved overnight. So, don’t fall into the traps of scammers who commit you to improve your CIBIL score within the shortest time by charging some amount.
