Lenders and banks check your CIBIL score in order to gauge your financial credibility and to mitigate potential risks caused by payment defaults on part of the borrower. CIBIL Score ranges between 300 and 900, with 900 being the best CIBIL score and 300 the worst CIBIL score. A CIBIL score below 500 is considered poor and it can lead to rejection of your loan application. So let us have a look at how you can improve your CIBIL score if it is below 500.

Ways to Improve your CIBIL Score if it is below 500

Pay your Bills on Time- Understandably, the proliferation of e-commerce has led to the ease of purchasing from anywhere at any time. But falling into the trap of impulsive spending can reflect poorly on your credit report and CIBIL score. You need to keep a check on spending your credit to improve your CIBIL score. You need to ensure that injudicious spending does not lead to default or delay in paying your bills on time.

Evaluate your Credit Report Regularly - Going through your credit report thoroughly on a timely basis will help you identify the areas you need to resolve to improve your CIBIL score. These areas which are to be resolved can include defaults or delayed payments which could bring down your CIBIL score. Always have a look at the loans or credit cards on which you have defaulted and take corrective measures accordingly.

Pay off Credit Card Balances - You need to pay off your credit card balances for improving your CIBIL score. If you have unpaid credit card dues, it will reflect poorly on your CIBIL Report. You need to spend only the amount that you can repay within the billing date. Also, it is advisable to limit the number of credit cards you have, to make it easier for you to keep track of your payments. 

Utilise Credit Prudently - Keep your credit utilisation ratio low for improving your CIBIL score. Ideally, your credit utilisation ratio should be less than 30% to 40%. Your credit utilisation ratio is the ratio of credit utilised by the borrower to the credit limit set for the borrower. Even if you get a high credit limit, keep a check on your credit utilisation. Never spend the entire credit as this will leave a negative mark on the lenders. 

Review Joint Application Regularly - You need to check your loan repayment record for the loans in which you have a co-applicant. Even if you are not at fault, default or delay in payment on the part of your co-applicant leads to a poor CIBIL score on your credit report. It is recommended that you reduce joint loan applications.

Maintain Credit History - Do not close old debt accounts as a history of good debts increases your financial credibility. The longer the credit history you have, the better, as long as you have a good payment history. Continue to maintain your credit history. 

Pay the Complete EMI Amount - Not paying your EMIs in full can lead to the accumulation of debt. The payable amount continues to carry interest. This has a severe effect on your CIBIL score. This is why you must make regular payments as it aids in improving the CIBIL score over time. 

Avoid Multiple Credit Inquiries - While it may seem lucrative to go through several credit checks before getting a credit offer, it is not the best thing to do. Every inquiry affects your CIBIL score. Thus, avoid this activity and try to understand credit offerings through online platforms. 

Reserve Bank of India (RBI) has made it compulsory for credit card companies, banks and other financial institutions to check the CIBIL Score of every loan applicant or credit card applicant. Hence, the CIBIL score with its range from 300 to 900, is an important determinant and influencer on your ability to access loans and credit. A CIBIL score below 500 significantly reduces your chances of getting your loan approved and hence, you must strive to improve your score if it is below 500.

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