You must have heard from friends and strangers that before you apply for a loan, you must check your CIBIL score. If you’ve wondered why, it is because it represents your credit history and sense of responsibility in managing credit. It helps you get approval and better terms on all types of credit facilities. Check out ten very simple ways to improve your CIBIL score over time.
Check Your Report Regularly
To improve your CIBIL score, you need to know where it stands today. So, you will have to request a free copy of the credit report from CIBIL or any other credit bureau. It is sensible to check the report as a whole to make sure all your loan and card accounts and running balances with different financial companies appear correct.
Make sure to record all your payments on time and avoid any delays. Disputing such inaccuracies can quickly improve your score. Regularly reviewing your report also keeps you informed of any changes to your credit status.
Make Payments by Due Dates
One of the key determinants for your CIBIL score is the payment history. You may be harming your credit score if you're paying late, defaulting, or omitting payments. To avoid missing your bill payments, set up automatic payments on your credit cards and loans, or receive reminders via phone or email.
Do not Overutilize Credit
Your credit utilisation ratio, or the percentage of available credit you use, is essential in determining your score. Ideally, keep this ratio under 30% to improve your chances of receiving credit from any instant loan app or other financial institution.
This means that if your credit card limit is Rs. 1 lakh, use up to Rs. 30,000 only. This shows that you are not overly dependent on credit.
Diversify Your Credit Experience
A healthy mix of various types of credit in your profile can help you increase your CIBIL score. This includes:
Unsecured loans like personal loan
Secured loans like car or home loans
Credit cards that offer revolving credit
Financial companies look for your ability to manage various forms of credit properly. Experience with more credit types improves CIBIL scores.
Limit New Applications
Lenders conduct a rigorous inquiry on your credit every time you go to apply for credit. This may slightly lower your score. In case you make multiple applications within a short span, lenders may consider that you are experiencing financial difficulty. This is why sending off multiple applications to improve your chances of approval is not a beneficial idea. Apply with care only for credit that you qualify for.
Keep Old Accounts Active
One of the most effective ways to improve your CIBIL score is to keep your old credit accounts active. This means continuing to use your oldest credit cards regularly but responsibly. A longer credit history demonstrates a consistent track record of managing credit, positively impacting your CIBIL score.
Don’t Be Fooled by the Minimum Due
Making only the minimum payment on your credit card results in interest and delays in paying off your debt. Paying more than the minimum amount due can help you pay off your debt faster, improve your credit score, and reduce your credit usage ratio.
Use Credit Responsibility
Using credit responsibly means only taking what you can pay back. This helps you avoid defaulting and racking up huge amounts in penal interest. It also helps you repay stress-free instead of stressing about how you’re going to send the next EMI or pay the next credit card bill.
Apply for Secured Credit Options
Consider applying for a fixed deposit-backed credit card if your CIBIL score is low and you are unable to receive approval for regular credit cards. It allows you to enjoy credit facilities with ease and build your score with on-time payments. Soon, you will be able to apply for unsecured credit cards and loans when your score improves.
Regularly Monitor Your Score
Often, keeping track of your CIBIL score provides regular feedback on how your financial activities are influencing it. It also keeps you alert for possible identity theft by scammers opening a loan account in your name.
Improving your CIBIL score doesn't have to be a cause for concern. With these ten practical tips, you can begin to take action to make your credit profile healthier starting today. Remember, responsible financial behaviour builds consistency.
Start with these steps and improve loan approvals and interest rates to secure a better future for your finances. Start by monitoring your CIBIL score. To get your credit score and report for free, download the OneScore app. It offers you personalised advice and frequent updates, so you can build a better relationship with your credit score!
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