Ways to Improve your CIBIL Score
A credit score is simply a mathematical prediction of one’s capability to pay one’s debts. Calculated from one’s data-rich credit report, the three digit number is studied by lenders to determine one’s creditworthiness for a loan, mortgage or credit card. The lower the credit score, the riskier the lender feels it is to lend an individual money, and the higher interest rate it tends to charge if it is opting to approve one’s loan request at all. A credit score below 560 is usually considered to be a bad credit score. Having a poor credit score would simply imply that lenders consider an individual to be a high credit risk.
In today’s credit-driven economy, a good credit score has become crucial to one’s financial success. Moreover, there are a number of other entities that use one’s credit history to make assumptions about one’s position to avail of credit. For example, insurance companies, landlords and potential employers may all look into one’s credit score before making an informed decision about one’s credit character. A poor credit score could lead to one being denied an apartment/flat, being charged higher insurance premiums, or not getting hired for a particular job.
A good credit score is usually considered to be above 720. Lenders, however, may each have varying standards for what they consider to be a trustworthy credit score, so it‘s crucial to keep building one’s score to be able to receive benefits of low interest rates and overall lower monthly payments.
Since credit impacts a number of aspects of our daily lives, bad credit is something that needs to be worked upon. Here are a few ways to get started:
- Pulling out one’s credit report: Firstly, one is required to study what is on one’s credit report before seeking out a sustainable solution to tackle the problem. It is wise to check one’s report for any discrepancies and ensuring that no incorrect entries are made and all timely payments are duly recorded and submitted by one’s lender to the CIBIL. Only after this, should one set an achievable target to work upon every month.
- Avoid applying for fresh credit: It is suggested that one avoids applying at another bank for a loan right after one discovers that one has a poor credit score since the more the number of inquiries a lender puts into the CIBIL about one’s score, the lower it tends to go. In such a case, it is advisable to hold off applying for fresh credit till a good credit score is obtained.
- Pay in full and on time, each month: One of the easiest ways to prove that one is responsible is to not use the credit card for things that one won’t be able to pay off on time and in full every month. Being late on one’s payments have a heavy and negative impact on the credit score. Furthermore, there is no advantage in only paying the minimum amount that is due on one’s credit card since it will only result in further interest and does nothing to improve one’s credit score. To rebuild one’s credit history, it is critical to make timely payments on one’s current debt. Only over a span of time will this positively reflect on one’s credit score. Furthermore, availing of of the auto-debit facility reduces the chance of skipping payments.
Successfully completing just one or two timely payments won't bring about a quick and dramatic jump in one’s credit score. However, discreetly utilizing most or all of these tips simultaneously over a period of time will surely boost one’s credit score, the results of which one could start observing within 6 to 12 months (or possibly sooner), depending on one’s unique situation.