Many users have a question - how do I boost my CIBIL score? To understand the tips and tricks, users must understand how the CIBIL score works and its impact on their financial health. CIBIL score is essential in determining whether you are eligible to get a loan.
Many users require additional funds for various reasons like buying a car, a house or pursuing higher studies, and to get the funds, they must maintain a healthy CIBIL score to ensure a smooth borrowing process.
This blog will help users to understand the CIBIL score, tips and the importance of maintaining a good CIBIL score.
Understanding cibil score
A CIBIL score is a three-digit number summarising an individual's credit history based on information in their Credit Information Report (CIR). The score ranges from 300 to 900, with a higher score indicating a better chance of loan approval.
A score of 750 or higher is considered excellent and may result in quicker and easier loan approval, and lower interest rates. A score between 700 and 750 is considered good, while a score between 650 and 700 is considered average or fair.
Tips to improve your cibil score
In this section, users will learn how to improve CIBIL points with beneficial tips & tricks.
Check your credit report regularly
Regularly checking your credit card report can help you identify errors. Always ensure that your personal and credit card information is accurate and complete and no unfamiliar accounts are listed.
By keeping track of your credit report, you can detect unauthorised or suspicious activities, such as new accounts, inquiries, etc., that you did not initiate.
When you check your credit card report, you can know if your actions are affecting your credit score positively or not. If you know what brings down your credit score, you can avoid that and get better offers on personal loans, home loans, etc., in times of need.
Must Read: What Is CIBIL Score & Why Is It Important?
Pay your bills on time
This is one of the most essential tips. Paying bills on time can help you establish a good credit history. A higher credit score can help you get better interest rates, access better products, and improve your chances of getting a new apartment or job.
Paying bills on time can also help you avoid late fees and penalties and create a foundation of financial stability. Create a monthly budget to allocate your funds and avoid delays. Create a routine for paying your bills to help keep you accountable.
Avoid opening too many new accounts
Opening too many new accounts can negatively impact your credit score, making it harder to manage your finances, and thus increasing your risk of credit card debt. Opening new accounts can lower your credit score because it increases the number of credit inquiries, such as applications for new financial products or requests for credit limit increases.
Each time you apply for a new credit card, the issuer will access your credit history, which is called a hard inquiry on your credit. A hard inquiry might lower your credit score by 5 to 10 points, and multiple inquiries could double or triple that impact.
Keep credit card balances low
Do you know how to increase your CIBIL score and keep your credit card balance low? When you keep your credit card balance low, it not only helps in increasing the CIBIL score but also maintains the Credit Utilisation Ratio.
Credit rating agencies like CIBIL and Experian consider your CUR when calculating your credit score. A low CUR shows that you're not relying as much on credit, which can help you get a higher credit score.
If you have a credit card balance, it is better to pay it off in full. Carrying a balance can lead to expensive interest charges and growing debt.
Must Read: What Is the Minimum CIBIL Score Required For Credit Cards?
Use credit wisely and responsibly
You must always use your credit card wisely and responsibly. Here are some tips you can use to maintain a healthy credit score:
- Pay on time: By paying on time you ensure that you are responsible. You can set payment reminders to avoid missing deadlines.
- Report errors: If you come across an unidentified transaction, immediately report it to the banks and raise a dispute.
- Increase your credit limit: If you are planning for a large purchase, you can request a credit increase. Based on your request and the reason for the increase, you can get a temporary or permanent increase in your credit card limit.
Benefits of a healthy cibil score
Many times users ask how to increase CIBIL scores faster, there is no way to increase the score faster as it takes patience, and you should be persistent. When you have a healthy CIBIL score, you can get these benefits:
Faster loan approvals
A strong credit score boosts the chances of loan approvals. The banks trust the numbers, and with a strong CIBIL score, you are guaranteed that you are capable of repaying the loan amount on time.
Low-interest rate
When you have a healthy credit score, you can get a low-interest rate as compared to those with an average credit score. It leads to a reduced financial burden, and you can allocate additional funds elsewhere.
Higher loan amounts
A strong credit score suggests that you are responsible and builds credibility among the banks. You can avail a high loan amount to turn your dreams into reality.
Negotiation power
A good CIBIL score boosts your negotiation power. You can negotiate loan conditions that are most appropriate for your financial needs. You might also request a greater sanction amount from your lender.
A strong CIBIL score offers a variety of benefits, including rapid loan acceptance and flexible payment options. It reflects responsible conduct, and lenders favour people with strong CIBIL scores.
With so many advantages to having a high CIBIL score, it is critical to increase your CIBIL score through better financial conduct. Your credit score will undoubtedly increase, allowing you to get loans in more advantageous conditions.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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