Your CIBIL score or credit score acts as a major factor in determining whether the lender or a financial institution approves your loan application or not. CIBIL scores are formed based on your credit history, which involves past credit and payment patterns concerning them. A high score signifies strong creditworthiness; on the other hand, a low score symbolizes low creditworthiness. Low scores will showcase you as a risky borrower, and lenders will be reluctant to approve your loan application.
TransUnion CIBIL, one of India’s credit bureaus, provides individuals and companies with a credit score ranging between 300 and 900. If your score is nearer to 900, the higher the possibility of loans getting approved. A score between 300 and 549 is a poor one, and any score ranging between 550 to 700 is said to be fair.
How to Improve CIBIL Score
Now that we understand why credit score is necessary, let us look into what you can do to improve your CIBIL score. The demand to improve your CIBIL score will arise only when your credit score is in trouble, and you are thinking of applying for a new loan or a credit card. If your score is not good, you can consider the below measures to improve your CIBIL score.
● Review Your Credit Report
Regularly checking your Credit Report is a great idea because it will let you know two crucial things about your credit score. The first will be the credit card or loan, where failures or delayed payments exist that have taken down your score. The second thing it will show you is the information that is written in the credit report. This aids in fixing the credit score because if you see that there is negative information, in the form of failures or delays in payments, mentioned on the report, you can always request the bank and CIBIL to get the situation rectified.
● Make Corrections to Errors
You should dispute all mistakes instantly by visiting the official website, www.CIBIL.com. Once you examine your CIBIL report, you can check the transaction that you disagree with or recognize the error. You have to work on the disputes within 30 days and correct the same.
● Pay your credit cards on time.
When it comes to credit cards, the best thing you can do is not to come too close to the limit of your credit cards. You should also ensure that you are not settling back only the minimum amount due on your cards; you require to pay back the entire amount or at least a sizable amount.
● Note Your Credit Utilization Ratio
Make sure that you do not utilize your credit card for every transaction. Try and maintain your credit utilization ratio at 30% or less. When you do this, you will notice a positive impact on your CIBIL score.
● Don’t keep applying for credit if rejected.
If you have appealed for a loan or a credit card and your application has been denied, the information will be shown in your credit report. If you apply to another bank immediately, they will notice your low score and the earlier rejection and reject your application. In such cases, the safest thing is to do is not to apply repeatedly and wait for the score to improve.
● Keep the frequency of applications low.
You should avoid asking for loans and credit cards too many times because every time you ask for credit, the bank will ask CIBIL for your credit report, and the request will be recorded in the report. A bank’s inquiry can also cause the score to come down after each request for your report. This indicates that you suffer two disadvantages, the first being that you display credit-hungry behavior and the second that your score comes down even if you have every intention and ability to pay back the loan/card on time.
● Get a mixed bag of credit.
When it comes to loans, there are two kinds of loans, secured and unsecured. If you have too many unsecured loans, banks tend to consider it negative and might be inclined towards rejecting your loans. You can also consider both unsecured loans like personal loans and secured loans like car or home loans. Keep in mind that credit cards also count as unsecured credit.
● Pay your loans
If there are loans that you have been postponing the payments, you should make it your preference to start becoming quick with the payment. If you are struggling with the current EMI that you need to pay, you can request your bank to restructure the debt to make it simpler to pay.
● Don’t settle loans and credit cards.
Many times people go for the settlement of a credit card or loan. This implies that they request the bank and ask for a settlement that will enable them to close the debt for an amount that is lower than the actual amount due. Sometimes banks do entertain such requests; the settlement does display on the credit report and will harm the score or bank’s willingness to extend fresh credit.
● Watch out for joint applicants.
In this situation, you could suffer even if you are not at fault. In this situation, if you are the joint applicator for a loan someone else has got, and they have defaulted on payments, then you too will lose out on your credit score, as it will exhibit in your report as well. The best way to avoid this is to make sure that the loans and cards are paid for on time.
While it is true that a bad credit score can be damaging to your future credit needs, the situation is not entirely beyond repair. The only thing you have to keep in mind is that it takes at least a few months for the scores to improve; thus, you have to be patient and wait for your scores to start showing any improvement. If you are looking for professional help then Askcred is the right choice for you as they have a team of experts that can help you out.