Have a low CIBIL score? How to improve CIBIL score?
CIBIL score is a three-digit number, ranging between 300 and 900 that defines the credit history of the person seeking a loan.
In India, CIBIL is one of the leading credit rating agencies. Banks and financial institutions use the CIBIL credit score as a reference point to evaluate the creditworthiness of borrowers.
If you have a CIBIL score between 300 and 549, you need to improve it to get approved for a loan as it is considered a low score, whereas a score between 550 and 700 is above average and gets loans readily.
If you are seeking a personal loan, you will need a CIBIL score of 700 and above.
Listed below are some of the ways you can improve your credit score:
How to improve CIBIL score
Borrow what you can repay
Just because it is easier to get a loan these days, does not mean it is a good idea to bite off a huge loan amount that you will not be able to repay.
Before you sign-up for a high EMI that affects your repayment cycles, you need to understand and take into account your income levels and monthly expenses.
Calculate the suitable amount of money you need and take a loan accordingly.
The sooner and more consistently you pay the loan amount back, the better it will reflect on your CIBIL score.
Be smart about loan/credit card rejections
Do not reapply for loans or credit cards multiple times post rejections.
Several applications made in a short period can be tracked by and assessed by various banks and concluded to be unworthy of credit, in turn, lowering your credit score.
Ideally, what you can do is study the eligibility requirements of the lender to make sure that you fit the category.
That will ensure lesser chances of rejections and a lower number of applications.
Build credit history with a credit card
In most cases where there is a stable income that can help repay the credit card bills on time, this little trick can improve the CIBIL score.
Since credit cards mean zero-cost finance, using them regularly and paying the bills on time can help.
The lender should be able to assess consistent repayment behavior and the absence of any associated risk when providing the loan.
You can opt for either a regular or a secured credit card.
Review the accuracy of your credit report
You are allowed to pull your credit report without affecting your credit score.
So, from time to time, check your CIBIL score for free and ensure that your credit report does not mention any aspect of your credit history inaccurately.
If there is a discrepancy such as inaccurate, missing, or outdated information, get it noticed by any of the four respective credit reporting agencies in India to get your CIBIL score fixed.
It is your responsibility to maintain correct information on your credit report.
RELATED: How to check CIBIL score for free on SBI
Fix Your Credit Utilization Ratio
To save your CIBIL score from dropping further, by all means, ensure that your monthly credit card bills do not exceed 30% of your credit limits.
That is because even with appropriate repayment, this exceeded amount reflects on your credit report as an outstanding balance which can hamper your credit score.
In case you do exceed it, consider pre-paying the amount before the due date to remain above the 30% mark.
Pay multiple times in a billing cycle
Using and repaying the credit card amounts once a month is not enough.
Going overboard with the a, even if you repay it on time, reflects as overuse in your credit report.
Since the creditors report these balances to the credit bureaus every month, the smart move here would be to divide your payment into multiple installments paid over the month.
That will reduce your debt while raising your credit score by signifying a secure financial standing.
Aim for a sound credit age
Ideal credit age is above five years, but if you have not been able to build that yet you need to be patient.
One of the solutions here is to make wise use of a credit card regularly for at least three to six months while repaying the bills on time each month.
That will eventually bring the desired activity on your credit score.
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* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice before you take any/refrain from any action. All information is subject to the relevant
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