When assessing your credit eligibility, the CIBIL score is one of the most important factors that lenders check. Credit score ranges from 300 to 900, with 300 being the lowest and 900 the highest. The score signifies your credit history, reflecting your repayment behavior which helps lenders get a fair idea to decide your application status.
A low credit score is a sign of poor financial behavior that can lead to a low interest loan being rejected or approved. To be able to access funds quickly, it is essential to have a good credit rating. Read to find out how you can increase your CIBIL score.
Repay your EMI loans on time
If you have taken out a loan i.e. secured or unsecured, make sure you do not miss any of the EMI payments as this can hurt your credit score which will prevent you from getting further loans in the future. If you are unable to repay your loan EMIs, it is best that you contact a lender to restructure your EMI and pay off the debt.
Don’t over-apply for credit: If your credit card or personal loan application has been rejected, remember that the same will be recorded in your credit file. So, if you are going to apply to another lender, they may also reject your loan application based on the low score. Therefore, the best thing to do is to wait and reapply after a period of 2-3 months.
Pay your credit card bills on time
Paying off credit card bills on time is a sign of good credit behavior and helps you improve your score. Make sure you are not only paying the minimum dues, but paying the full amount due.
Avoid taking on too much debt at once
The number of loans you hold has a big impact on your credit score. Taking multiple loans shows that you are unable to manage your finances and further lowers the score. On the other hand, if you are able to repay the loan EMIs on time, it can increase your score.
Monitor your credit utilization rate
Using a credit card to make purchases can help you get cash back and earn rewards points, but it’s critical that you keep credit usage below 30% your credit limit. This can help improve your credit score and give lenders a sense of assurance that you are not dependent on credit cards for all purchases.
Be sure to maintain a mixed bag of credit
There are two types of loans that you can opt for secured and unsecured loans. Taking too many unsecured loans negatively impacts your score, while opting for secured loans like home or car loans can actually help boost your score.
Check for errors in your credit report
It’s important to note that your financial dealings may not be the only reason for a low credit score. There may also be errors in your credit report, which is why it is imperative that you continue to check it regularly. Note the incorrect information present in your credit report and report it to the CIBIL authority to rectify the errors and update the report with the correct details.
Opt for a longer loan term
When you get a loan, opt for a longer repayment term, as this will ensure you have a minimum of EMI to pay each month and you will be comfortable making timely repayments. Your credit score improves if you don’t delay, default, or skip your EMI payments.
Avoid credit card closure
The age of your credit history is important. If you have an old credit card towards which you have maintained good credit behavior, then avoid closing the credit card. Remember that the longer the credit history, the better your credit score, which indirectly increases the chances of getting your loan or credit card application approved.
Set up payment reminders
Set up your EMI dates and credit card payment dates in your calendar to pay the same on time and avoid default. Being consistent with your payments will help you improve your CIBIL score.
Follow-up of your guarantor, co-signatory and joint accounts
If the primary account holder defaults on their loan, then you will be required to pay the dues. The negligence of your joint account holder can affect your credit score, and you will be denied access to it as and when you need it. Additionally, you will need to clear contributions if the primary account holder is unable to do so. Therefore, it is best to avoid becoming a co-signer, guarantor, or co-account holder for any type of loan or credit card.
Increase your credit card limit
This does not mean that an increased credit card limit increases your spending cycle. The trick here is that it can help you improve your CIBIL score. Increasing the credit limit will help you keep your usage low, and in doing so, you will leave a positive impact on your score.
Following the tips above can help improve your credit score. However, it is important to note that your score cannot be improved overnight and it will take you around 3-6 months to achieve good financial behavior. By working on improving your credit score, you open up a whole new world of opportunities for yourself as it helps you get quick access to credit card funds, fast loan approval, low interest rates and a high loan amount.
(Viral Bhatt is the founder of Money Mantra – a personal solutions company)
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Published on: Sunday, May 8, 2022, 07:00 IST