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10 Tips To Improve Your CIBIL Score

Updated: May 3, 2023

Have you been planning to buy a new house? or a new car perhaps? Or maybe you just need a loan to fulfill some personal commitments? Thanks to banks and other financial institutions today, buying your dream house and your dream car is possible even if you don't have the exact amount. How? By applying for a loan. Now, you want a loan but will the financial institution give you the money you are asking for? why would they give you the money, on what basis? Quite simply, any bank or financial institution will provide you with credit only once they are sure that you have the will and the means to return the credit. One of the ways to determine this will be by looking at your CIBIL Score.

What is a CIBIL Score?

you must have seen advertisements on the television or between your favorite serials about CIBIL Score. What exactly is it? Let's find out!

So, four credit information companies are licensed by the Reserve Bank of India, namely Equifax, Experian, Highmark, and CIBIL. out of all these four companies, CIBIL is the most famous one. these companies collect data from 32 million businesses and 600 million individuals and record their credit histories. Based on this data, CIBIL releases a credit score for each individual or company that gives banks and other financial institutions an idea of how capable these individuals and businesses are in paying back loans or credit.

CIBIL India is a subsidiary of TransUnion, an American multinational corporation. As a result, credit scores in India are referred to as the CIBIL TransUnion Score.

CIBIL Score is a three-digit number anywhere between 300 to 900. the higher the number, the better your chances are of getting a loan or credit.

10 Tips to Improve Your CIBIL Score

In the range of 300-900, anything below 700 is considered a bad score which means that banks and other financial institutions will consider such a score as a warning sign not to give you any loan or credit. But, you don't have to be disheartened as there are a few days by which you can increase your credit score and make every financial institution willing to give you any form of credit that you ask for! So, let's discuss in detail ways in which you can increase your credit score:

  1. Be Fully Aware Of Your Credit Score

How can you find a solution to something when you are not even aware of this problem? You need to be extremely alert about your credit score. There is no point waking up to it when you need a loan. It would be too late to get a better credit score at that time. Keep checking your credit score every six months to judge your position in terms of credit. This will also allow you to take corrective measures to increase your credit score well in time.

Also, By checking your CIBIL Score, you can spot errors or discrepancies in the CIBIL Score reports. there may be cases where CIBIL can make a mistake in your accounts, and you can quickly sort the issue out by reaching out to them or submitting an online dispute to CIBIL.

2. Pay Your Full Credit Card Amount Each Month

Your credit card bill usually comes with two figures - one is the total amount due, and the other is the minimum amount due. Now, it is a human tendency to look at a similar amount, Pay that much, and leave the rest later. However, ignoring the total amount payable for a long time will only be a negative remark in front of the CIBIL institute and affect your credit score. Moreover, not paying the total amount of your credit card will also attract interest on the full amount.

3. Be Aware of How You Use Your Credit Card

Like, we all know, each credit card has a certain credit amount that can be used as per requirement in a given month. this amount is decided by considering your income, existing loans/credit, credit score, etc. Now having a specific credit limit doesn't mean that you spend the entire amount every month.

If you use up the credit card limit every billing cycle. the credit agencies will consider you as someone looking to live on credit and loans. Have two credit cards and divide your spending evenly amongst the two credit cards. As a result, the ratio of credit utilization will be below.

4. Pay Attention to Your Credit Mix

Credit or borrowing can be divided into secured loans and unsecured loans. secured loans consist of home and vehicle loans, whereas unsecured loans are personal loans and credit cards. If you want credit cards and personal loans, this will be considered a negative point by the credit agencies. hence you must ensure that your credit ask is a mix of secured and unsecured loans. As they say, anything in excess is not a good thing!

5. Pay Off All Outstanding Loans

Everyone who takes out a loan of any size should know that borrowed money must be rapid in full, plus interest. There may be some previous loans in which you skipped the final payment and figured your lender would just let it go. Unfortunately, your loan accounts will not be canceled unless you pay up the entire balance, down to the last penny. Your credit report will list them both as open and default, which is not beneficial for your financial well-being. Make sure you pay off all of your debts so that you may receive a certificate from your lender showing you have no outstanding debts.

6. Pay Off All Your EMI's On Time

You will always be expected on time for a loan to be granted. Did you know that your banks and lenders submit all of your repayments history to the credit bureaus, which then use this information to calculate your credit score? one of the most important aspects of healthy credit behavior making on-time repayments. As a result, you must keep up with your debts payments. The sooner you tell your lender about any problems you're having, the better you will be. if it's a one-of-a-kind situation, your lender will make an exception.

7. Avoid Joint loan Applications

By opting for a joint loan application, you are pretty much putting your reputation and credit score at stake. when you apply with another person jointly for a loan, remember that your credit score will be integrated with the other applicant. If in any case, the other applicant defaults in repaying the loan or the credit amount. it will not just affect his credit score but also your credit score. Therefore just to be safe avoid joint loan applications. if you still apply for a joint loan, make sure you pay the credit on time.

8. Avoid Applying For Credit Often

The credit bureau makes inquiries into your credit score every time you apply for credit, such as a loan or credit card. this form of inquiry is known as a hard inquiry. the more credit you apply for the more hard inquiries your card will receive. One too many credit checks can have a negative impact on your credit score. Therefore frequent credit applications are not considered a healthy credit practice. Instead, apply for credit only when you need it, not every time you are offered a credit card or loan. This will keep your credit rating high.

9. Consider Debt Settlement Option Cautiously

Sometimes, there may be situations where you may get stuck in paying off your loans. In such cases, your lenders can give you an option to settle your accounts. This means that your lender may either choose to reduce your repayments or excuse them completely. However, such a situation will be a bold red flag in your credit score, and your credit score will just sag a lot lower. The only situation to this would be to speak with your lender and ask them to give you some more time to repay your debts.

10. Think Before Closing Old Credit Accounts

Better loans and credit offers are always doing the rounds in this competitive market. However, if you get allured by these new offers and choose to keep closing the old ones every now and then, you must know that the length of any of your running credit relationships plays a vital role in determining your credit score. When you have a long association with a particular credit or loan, you have successfully handled that specific credit. Therefore, think a hundred times before you close a running credit account.

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