What is a CIBIL score?
CIBIL Transunion Score is a 3 digit number which represents your credit history. The credit score is calculated on the basis of your credit report which contains your credit history. The CIBIL score ranges between 300 and 900. High score implies a good credit history. So, closer the score to 900 better it is. If you have score closer to 300, there are high chances that your credit card or loan application will be rejected.
What Are the Ways to Improve your CIBIL score?
Based on your CIBIL report, your CIBIL rating is an essential part of your credit history. A CIBIL score of less than 750 can be a curse for those looking for a personal loan urgently. But this score is just a number and can be improved. All you need to do is to focus on the below mentioned factors and get your loan approved without any further delay.
- Set reminders to repay on time: Missing out on repayments for your outstanding debt can be a big mistake as it can badly impact your credit score. You need to be punctual when it comes to paying the EMIs. If the EMIs get delayed, you not only pay penalties but your credit score will also go down. If you are someone who is bad at remembering dates, set reminders to repay on time.
- Check for errors in your credit report: In your head, you might have a good credit history, but there can be various unknown errors that might be pulling your credit score down. Let’s say, if you have paid your loan completely and have closed it from your side, but it is still appearing as current due because of an administrative error. Likewise, you will have to keep a check on other errors and suspicious activities. Resolve these errors and you will see an immediate rise in your score.
- Try maintaining a healthy credit mix: It is always advisable to have a good mix of unsecured loans like credit cards, personal loans and secured loans like auto loan, home loan. An individual with a higher number of secured loans is preferred by the lenders and the bureaus also give a good credit rating to them. If you have a higher number of unsecured loans as compared to the secured ones, try prepaying your unsecured loans to maintain a healthy mix.
- Clean all credit cards: Any lender seeks for good and positive financial behavior and clearing off all your credit card dues signifies this behavior. Strategically plan to clear your credit card balances before the due date and improve your credit score.
- Say no to being a joint account holder: Avoid becoming a joint account holder or guarantor of loans as any default from the other party will also get reflected on your CIBIL score.
- Get a secured card: If you get a secured card from leading banks like ICICI Bank, AXIS Bank, SBI, etc. against a fixed deposit and repay the balance on due date, your CIBIL score will have a rise.
- Avoid taking multiple loans at a time: It is a good practice to repay the current loan before taking another one to keep your credit score away from getting low. Taking many loans at a time shows that you might have insufficient funds to pay them all. It is better to take one loan at a time and pay it successfully to give a boost to your credit score.
- Limit your credit utilization: One of the fastest ways to improve your credit score is to not utilize your credit card to its extreme limit. Ensure to spend only 30% of your credit limit per month. Let’s say, if your credit limit is of Rs. 1,00,000 a month, ensure that you do not pay more than Rs. 30,000 through your credit card. Exceeding 30% will signify that you spend without giving your expenses a second thought and will make your score to drop.
- Choose a longer tenure: When taking a loan, go for a longer tenure to repay money. This way, the EMI will be low and you will easily be able to make all the payments on time. You will keep yourself away from the defaulters list and will improve your score.
- Increase your credit limit: Never say no if your bank asks you to increase the credit limit of your card or you can also ask your bank for this increase. It does not mean that you are going to spend more money every month rather you will have to be smart about managing your expenses. The simple trick is to have a lot more credit and keep your utilization low to leave a positive impact on your score.
Usually it takes 4- 13 months to improve your credit score, completely depending on an individual’s situation. All you need to be is smart, patient and disciplined while spending money or taking a loan.
Also read: Mistakes That Can Lower Your Credit Score