9 Tips to Build or Maintain a Healthy CIBIL Score

At present, there are many people with bad credit scores and due to a lack of awareness they are unable to improve them. People who are New-to-Credit (NTC) must understand that credit score is considered to be the backbone of their financial health.

Bad and poor credit scores may bring financial loss to an individual at the time of a new credit application. People with good credit scores should also remain cautious by checking their credit reports periodically, as sometimes due to some misinformation provided to credit bureaus, their credit score may reduce. Therefore, let’s understand firstly about some common tips to improve the CIBIL score.

Also Read: Why You Should Check Your Credit Report/Score Regularly?

9 Ways to Improve Your CIBIL score

Follow the below-mentioned measures to start building or improving your CIBIL score to avail credit facilities at ease with added benefits:

1. Avoid Late Payments

Any type of repayment related to loan or credit card EMIs should not get delayed, as it directly impacts your CIBIL score negatively. People can avoid late payments by aligning payments to auto-pay mode, setting up reminders and making monthly task sheets.

Suggested Read: Reasons why you should not miss your credit card payments?

2. Check Your CIBIL Report for Errors

This is the most important factor that influences the credit score. One can check his/her credit report for inaccuracies or misinformation shown in the credit report. If in case there is any discrepancy in the name or the changed address has not been updated then one can raise a dispute and get the issue(s) resolved. This practice helps in the improvement of your CIBIL score.

3. Lower the Credit Utilization

Borrower availing credit should maintain his/her credit utilization ratio below 30% of the total available credit limit. This mark can be achieved by balancing the burden of expenditure from one to multiple credit products. By lowering your credit utilization ratio, you will be building and maintaining your credit score which will eventually benefit you and make you even more financially secure. Try not to maximize the credit utilization over 80%, as it depicts your credit-hungry behaviour and shall result in the denial of credit application.

4. Maintain Healthy Credit Mix

Unsecured loans including personal loans, business loans, and education loans are generally considered as the foremost reason for reduced credit scores. As these loans are sanctioned without any collateral, the risk involved is much more as compared to secured loans, such as home loans or auto loans. To maintain a decent credit score, one should always opt for a mix of credit due to which the risk factor balances in return providing a better credit score. A healthy mix of credit does not put banks in trouble, as by doing so an applicant will not be considered as a high-risk borrower.

5. Avoid Multiple or frequent enquiries in short duration

Do not apply for multiple credits simultaneously, as this displays your credit-hungry behaviour to the lenders. Every time there will be a credit enquiry when a loan application is submitted. Frequent loan applications have a negative impact on lending institutions the applicant and the chances of loan rejection increase. Therefore, apply for fresh credit only when you need it.

6. Do not exhaust the available credit limit

Avoid using your credit limit to the maximum, as due to this your credit utilization ratio increases which in turn lowers your CIBIL score. However, if the expenses are burdening the existing credit line, so one can request a bank for the increase of the credit limit.

7. Do not close old accounts or credit cards

Closing your old accounts or credit cards is never a wise decision as it depicts your long association with the banking institution and shows your long repayment history with the same. Closing old credit cards or accounts nullifies your previous record with the bank, thus impacting your credit score negatively.

8. Monitor your co-signed loans

It is important to keep a check on any loan that you have co-signed. Sometimes the borrower, due to some financial emergencies is unable to repay the loan amount which you are unaware of. Due to missed or delayed payments, the only thing that gets impacted is your credit score. Therefore, it is recommended to keep track of loan(s) that you have already co-signed.

9. Avail at least one credit product

Individuals with no credit history also face difficulty in getting loans sanctioned under their name. Even if they get their loan sanctioned, still the interest rates offered will be on the higher side, as compared to deals available for people with credit history. So, availing at least one credit line like a credit card could be a viable option in maintaining credit history and making your credit score rise to 750 and further close to 900.

TransUnion CIBIL and CIBIL Score

TransUnion CIBIL Limited (Formerly known as Credit Information Bureau (India) Limited) is a credit information company that collates, manages and generates CIBIL scores for individuals and CIBIL ranks for companies. Founded in 2000, TransUnion CIBIL works with numerous financial institutions, NBFCs, banks and housing finance companies.

A credit score is a 3-digit numerical representation that signifies the creditworthiness and repayment capability of an individual. Generally, a credit score ranges between 300-900, wherein any score close to 900 is considered good by financial institutions and NBFCs (Non-Banking Financial Companies). TransUnion CIBIL states that “79% of loans or credit cards are approved for individuals with a CIBIL Score greater than 750”.

Any score above 750 is considered good enough by most of the lenders. To avail lending products at lesser interest rates, these measures should be thoroughly considered before applying for a loan or credit card. If these simple steps are followed, then one may observe a gradual increase in his/her credit score.

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