Your CIBIL score, often known as your credit score, is crucial in deciding whether you will be accepted for a loan. With the help of your credit history, including previous credit and associated payment habits, CIBIL score is calculated. A high credit score implies excellent creditworthiness, whereas a low credit score shows poor creditworthiness. You become a high-risk borrower if your credit scores are low.
Moreover, lenders will be unwilling to approve your loan application. CIBIL scores range from 300 to 900. For the approval of a personal loan minimum CIBIL score is 750. Anything below it causes concern. However, your credit score can be improved by changing some financial habits.
How to Improve CIBIL Score
Here are the steps you should adopt to increase your CIBIL score:
Pay off your debts
If you have been repaying your debts lately, or postponing them from time to time, then you should make it a priority to start being on time with your payments. If you are having difficulty paying your existing EMI, you can ask your bank to assist you in restructuring the loan to make it simpler to pay.
Bare minimum borrow and avoid multiple loans
Suppose you are constantly nearing the limit on your credit card or apply for too many loans. In that case, your CIBIL score will likely suffer since such behaviours demonstrate credit-hungry behaviour. One of the significant ways is to avoid taking out loans unless required and exceeding your credit card limits.
Keep an eye out for joint accounts
In this case, if you are a joint applicant on someone else’s loan and they default on payments, you will also suffer a drop in your credit score because it will be included in your report. The simplest method to avoid this is to ensure your loans and credit cards are paid on time. And if it’s the other way around, any fault on your side will affect the account holders’ credit card reports. However, it is not beyond repair. You can always try to pay your loans at the right time to avoid the situation and improve your CIBIL score.
Check for errors
You should check for errors by visiting the official website. After reviewing your CIBIL report, you can get to know the transaction with which you disagree or get to know about how inaccurate it is. You must act on the disputes within 30 days and correct them. You’ll also need to watch for additional flaws and suspicious activities. Your score will quickly increase if you address these issues.
Take note of your credit utilisation ratio
Make sure you don’t use your credit card for everything. Maintain a credit usage percentage of 30% or below. Also, while a credit usage ratio of 60-70 per cent is OK, a ratio of 90-100 per cent can lower your CIBIL score.
Examine your credit report
Checking your credit reports regularly is smart since it will reveal essential aspects of your credit score. The first will be the loan or credit card with late payments that have reduced your credit score by a significant value. The second thing it will tell you is the information on your credit report. This aids in credit repair because if you find completely different information on the report, such as payment delays, or defaults, you can always approach the bank and CIBIL to address the problem.
Select different types of credit
Credit, when used responsibly, may be advantageous since someone who has never had any form of credit has a lower CIBIL score, making it more difficult for them to obtain loans. You may enhance your CIBIL score and credit history by taking out a few loans, which might include a combination of secured and personal loans and long- and short-term loans.
Choose a longer payback time when taking out a loan. Consequently, your EMI will be low, and you will be able to make all your payments on time. You will avoid being included in the list of defaulters, and your score will rise as a result.
Increase your credit limit
Increasing your credit limit will lower your credit utilisation ratio, which will help improve your CIBIL score. Therefore, it is a wiser choice for you to increase your credit limit by approaching the bank that way, you can keep your utilisation ratio low and maintain your CIBIL score.
A strong credit score not only increases the chances of acquiring a loan/credit but also helps you grab a better interest rate. While you are looking for a makeover, paying attention to and improving your credit score is crucial before contacting a lending institution. Therefore, make sure to learn the ways mentioned above on how to improve CIBIL Score.