Best Ways to Increase Your CIBIL Score
A good CIBIL score is a significant factor in any loan or credit application process. A lower score may affect your chances of getting a loan approved. Therefore, it’s important to be aware of your options to learn how to improve your CIBIL score.
The CIBIL score is generated based on a person’s history of timely credit repayment. When evaluating loan applications, banks and financial institutions take the CIBIL Score into account. You stand a strong chance of having your credit card and loan applications accepted if your score is 700 or above. A good CIBIL score also qualifies you for loans with lower interest rates.
What is a Good Credit Score?
A credit score is a three-digit number ranging between 300 and 900 based on your credit history. TransUnion CIBIL, one of the biggest and most well-known credit bureaus in India, assigns credit ratings to companies and individuals that range from 300 to 900. Your credit score is ideal if it lies between 750-900.
A good CIBIL score demonstrates fiscal discipline and practices, increasing the likelihood of getting a loan approved with flexible conditions. Banks and other financial organisations evaluate your creditworthiness and ability to repay the loan on time with the help of your CIBIL score.
| CIBIL Score | Rating |
| 300-500 | Poor |
| 550-650 | Average |
| 650-750 | Good |
| 750-900 | Excellent |
Top 10 Tips on How to Improve Your CIBIL Score
First, you need to understand the different factors that determine your credit score including repayment history, outstanding balance, age of the credit portfolio and credit inquiry.
Here are some of the best ways to improve your CIBIL score. If you follow these instructions, your CIBIL score will eventually improve, giving you a better chance to obtain credit from banks and NBFCs.
1. Timely credit repayments
Lenders highly consider how consistently you pay your payments when they analyse your credit report and ask for your CIBIL score. This is because past payment behaviour is often regarded as an accurate indicator of future behaviour. Your CIBIL score can be significantly lowered by even one late or missed payment.
Make sure you pay all of your expenses on time, including credit card bills and loan EMIs. Don’t forget any deadlines.
2. Use several credit cards
Spending excessively on just one credit card will lower your credit score. It is a good idea to use several credit cards but monitor your spending.
You can also establish a variety of credit types, including some long-term secured loans like mortgages or auto loans, some secured credit cards, and some short-term low-interest loans. By doing so, you raise your credit score and demonstrate to lenders that you have good money management skills.
3. Minimum credit utilisation ratio
The question “how to increase CIBIL score” has simple answers. Avoid using your credit card limit to the maximum capacity if you want to increase your CIBIL score. Your credit score suffers as a result. Let’s say you use the limit entirely. If so, make sure the payment is made in full or in part to reduce the utilisation to 60–70%. However, keep your credit utilisation ratio at 30% or less of your card’s authorised credit limit.
4. Do not discard old credit cards
Some people might believe that since the old credit card isn’t being used, it’s best to close it. However, it can impact your CIBIL scores. Also, lenders view this as evidence that you cannot manage many credit lines.
Maintaining older credit cards is crucial, as is paying the bills in full every time. Even if you are not using them anymore, don’t close them. If you must, close the recent ones.
Maintaining old credit cards allows you to have a solid credit history, improving your CIBIL score easily.
5. Get a new credit card only if necessary
Consider whether you need to open more credit card accounts or not. Having several unused credit accounts will only result in additional charges and won’t help increase your CIBIL score.
6. Do not apply for credit frequently
The lender examines your credit report each time you apply for a new credit line. Every draw count as a hard inquiry, which briefly lowers your CIBIL score. Avoid filing several loans or credit card applications frequently. By comparing offers, researching, and choosing the lender offering the best deal, you can minimise the number of hard queries you make.
7. Check your credit report regularly
One of the most crucial ways to improve your credit score is to check your credit report. It will help you find any mistakes in your report. You must fix any inaccuracies you find in your credit report. If you find any errors, you can contest them. The authorities will check the information and fix your report as needed. Your CIBIL score is determined based on the data in the credit report. You must ensure that the credit report is free of any errors.
8. Avoid raising credit disputes
If you have made late payments and must pay penalty interest, make the required payments as soon as possible. Do not raise issues over your credit disputes. Instead, report any fraudulent transactions or unauthorised charges, as they can affect your CIBIL score.
9. Pay your dues in full
Your credit dues should be paid in full or at least more than the minimum amount due. Your chances of increasing the CIBIL score are lowered if you pay only the minimum amount.
10. Monitor your CIBIL Score regularly
Sometimes, you may receive an inaccurate CIBIL score. You should calculate the CIBIL score and check it in advance. It is because you won’t be able to change the report at the last minute. It will help you prepare your credit or loan application more correctly.
Conclusion
Keep in mind that improving your CIBIL score is a process that will take time; there is no quick fix. To improve your CIBIL score, you must be disciplined and informed about your options. Be cautious and steady, check your CIBIL scores regularly, and make necessary adjustments. A financial expert like Piramal Finance can help you with applying for a personal loan and managing your credit card scores swiftly. Also, visit our website to learn more about finance and investment opportunities.