CIBIL score is one of the most important factor which is considered by the bank when you apply for a credit card, loan or insurances. Having a bad CIBIL score decreases the chances of approval for your credit card or loan application.
What is a CIBIL score?
Before discussing the ways to improve your CIBIL score, let us first know what actually is CIBIL score. CIBIL score of a person is like tracking the financial behavior of a person. It includes information of various loans or credit cards that you have taken in the past and also if you made the repayments on time or not. With these details it is easy to track your financial behaviour by the bank and find out if you will be able to repay the loan that you are applying for.
CIBIL score can be measured on a scale of 300 to 900 points. In this 300 is the lowest score and considered to be a very bad score with bad repayments history and bad financial behavior. Having a score between 500 to 700 is also not a very good score and it indicates delays and irregularities in payments. Score between 700 to 750 is considered somewhat good and you may easily get loans. A score above 750 is considered to be excellent and indicates that the repayments were always on time and without any issues.
Improving your CIBIL/credit score
If you have a bad credit score and all your loans/ credit cards application are being rejected, here are a few ways to improve your credit score:
- EMI payments: If you have taken a loan or have an insurance on your name, make sure that you pay the monthly installments in time. Not doing so is going to worsen your CIBIL score which will affect you badly in future.
- Check your credit report regularly: It is a good habit if you check your credit report regularly because this gives you an idea about the reasons behind your bad credit score like which loan resulted in lowering your credit score. Knowing this will help you improve your credit score by repaying that loan always in time.
- Correcting any record in the CIBIL report with which you disagree: There may arise situations where the bank may have input the wrong entry in the CIBIL report which resulted in lowering your CIBIL score. By checking your report regularly, you can also make sure that you get such problems resolved. If you find any record representing default in repayment of any loan which you disagree with, you can register your complaint to www.CIBIL.com and get this removed from your credit report by giving them valid reasons and proper proof. This will directly improve your CIBIL score.
- Clear all the credit card outstanding: It is a good idea to keep as few credit cards as possible. This will simplify keeping track of all your expenses and the repayments. By paying off all your credit card bills within or before time will improve your credit/CIBIL score. Delaying these payments are going to badly affect your credit score.
- Minimum use of credit card: It is considered a good habit by the banks if you use only 30% or less credit limit of your credit card. This displays that you are financially responsible and avoid using money for things that are not important. Along with timely and regular payments of your credit card outstanding, this factor is also very important and affects your CIBIL score.
- Credit limit: Having a high credit limit is also considered to be a good sign by the banks. If your credit limit is increased by the banks directly or on your request, this is going to leave a good impression on your CIBIL score. The reason behind this is that your credit limit is increased only if the bank trusts you enough with the payments.
- Using old credit cards: Using a credit card that you have been using for a long time also helps in maintaining good CIBIL score. This is because the history of your timely repayments is longer and this makes the banks confident enough to lend you money or offer you a credit card.
- Don’t apply for too many loans or credit cards: As mentioned earlier, it is good to keep as few credit cards as possible. Having too many credit cards or loans is bad for your CIBIL score as it will leave a bad impression on the banks. Also you should not keep reapplying for a loan or credit if it has been rejected once by the bank. Rejections are always reflected in your credit report and also increases the inquiries on your credit report which is also responsible for reducing your credit score.
- Secure credit card: If you have a bad credit score and you are not getting any credit cards because of this, you can apply for a secure credit card by keeping something as mortgage. Repayments of this secure credit card will improve your credit score if you maintain good financial behavior.
- Secured and unsecured loans: Taking only unsecured loans may leave a bad impression on the banks, but if you have taken both secured and unsecured loans it may increase the level of bank’s confidence on you.
- Loans from peer to peer platform: There are situations when you want to improve your credit score by taking a small loan from bank and repaying it on time,but the bank is not lending you money because of your bad CIBIL score. In such situations, taking loans directly from peer to peer platform may also improve your CIBIL score because they lend money to people with bad credit scores too(if the borrower has a valid reason).
- Don’t be a co-borrower to a defaulter: Taking loan from the banks with another person with a bad repayment history can also affect your credit score. So be careful when you apply for a loan with such a person and make sure that you and your co-borrower pay the money regularly and timely.
These are a few important points that will definitely help you improve your credit/CIBIL score which is good for any financial need in future. Having a good CIBIL score always play an important part in approval of any kind of loan that you may take.