Banks and credit providers each have their own set of parameters when deciding to lend an amount to an applicant. However, the RBI has mandated that banks must consider CIBIL scores while evaluating every application.
The CIBIL (Credit Information Bureau India Limited) report gives detailed information of all your credit history as well as your borrowing and repayment behavior. The CIBIL score ranged between 300 to 900; those with scores above 750 are more than likely to have their loan applications approved without a hitch.
On the other hand, a bad score can really hurt your chances of getting your credit applications for loans and credit cards approved. But there are a few quick and long-lasting moves you can make to improve your CIBIL score if it’s too low.
Tip #1: Pay your dues on time
If you have been missing or delaying your Credit Card repayments or EMIs, start getting organized. Set reminders and alerts well before the payment is due to become more disciplined in your repayment behavior. Avoid excessive usage of credit cards and settle any old outstanding debt to improve your CIBIL score significantly. Delaying payments on EMIs can force you to pay penalties as well as bring your CIBIL score down drastically. So getting any larger loan amount to buy your dream house or car will never come true if you have a low CIBIL score. Experts suggest using services that allow automated repayments so you won’t have to worry about missing deadlines. For easy access to your CIBIL report, check your score on Finserv MARKETS in all of three quick, easy steps. Then accordingly start adding reminders!
Tip #2: Be prudent with your credit
It is essential that you do not go overboard on the amount of credit you make use of. Borrow prudently by avoiding taking on too much debt in one period. It’s always advisable to repay one loan before borrowing another. Opting for several loans at one time can bring down your score drastically. This raises red flags for lenders, since it could potentially lead to a debt trap. If you want to quickly improve your CIBIL score, repay a loan you took as soon as possible.
Tip #3: Maintain a healthy credit mix
A good credit mix is a healthy balance between your secured and unsecured loans. A secured loan is usually a car or home loan while an unsecured loan refers to a credit card or personal loan. Taking out only one type of loan, be it secured or unsecured, is viewed very unfavorably. Keep your credit utilization ratio within 30% of your card limit to build a good CIBIL score. A low-balance credit card usage will reflect well to give you a healthy score. Having a good balance between different types of credit gives lenders the impression that you can manage all kinds of credit and more likely to repay your loan in a timely manner.
Tip #4: Keep your old credit cards
A lot of people believe that they must close old credit card accounts they don’t use anymore. But they also don’t know the impact that has on their CIBIL score. In fact, keeping a well-managed credit card account with consistent repayments can have a significantly positive effect on your credit scores. It provides your score with some much-needed long credit history, a major factor for evaluation. Keep that account with a consistent repayment history for as long as you can.
Tip #5: Pay Outstanding Credit Card Bills with a Personal Loan
Have you defaulted or delayed your card bills and see a mounting credit card debt? Opt for a personal loan to pay off that large amount. Personal loans come with much lower interest rates of 11-25% than credit cards rates of 30-40%. In one time, you can pay off the whole card balance instantly and repay your personal loans at a low interest rate. You get a comfortable repayment scheme and can increase your credit score at the same time.
Tip #6: Review your CIBIL report frequently
As mentioned your CIBIL report is a detailed account of your credit history. You should constantly check your CIBIL score to find any inconsistencies or credit activities that are bringing down the score. If you find an error, it is your responsibility to report it and get CIBIL to rectify it. A lender could make errors when entering data for particular transactions or updating your records. Sometimes even a loan you repaid might not be updated on your report, which can hamper your score. Once the error is resolved, you will see a rise in your score. Do not apply for new credit before your disputes are resolved. On Finserv MARKETS, you can check your CIBIL report for free anytime, without it affecting your score.
If you have a low CIBIL score, follow these tips to quickly and efficiently improve your CIBIL score. Not only will it help you avoid mounting debt, but also help you in securing future credit. A high CIBIL score would mean you are a disciplined spender with good repayment habits.
Also read how long it takes to improve CIBIL Score
Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.