A low CIBIL score can cause hindrance to your loan application when applying for instant loans. Many lenders consider this score an essential factor for your loan application approval as it clearly describes the borrower's creditworthiness. Recognising this and checking your CIBIL score online is a good practice, positively impacting your loan application.
In India, CIBIL stands out as a premier credit rating agency, and a score above 750 is considered excellent. Now, there are applicants who don't have a credit score or have a low score. To improve your CIBIL score, specific steps can be taken to secure credit in the long run. In this post, we will talk about the seven key steps to improve your CIBIL score.
What is a good cibil score?
A CIBIL score is a very important indicator of your credit health, influencing your access to financial opportunities. Simply put, it is a numerical representation of your creditworthiness, reflecting your credit history and repayment behaviour. The score, ranging from 300 to 900, categorises individuals into different credit score bands.
Here is a detailed overview of the CIBIL score range to easily interpret when checking your CIBIL score online:
| CIBIL Score | Creditworthiness |
| 550 and below | Bad |
| 500 and 649 | Poor |
| 650 and 699 | Average |
| 700 and 749 | Good |
| 750 and 900 | Excellent |
A good CIBIL score falls within the "Good" range (650 - 749), signalling to lenders that you are a reliable borrower. As your score progresses into the higher brackets, you gain access to more favourable terms and a broader array of financial products.
Must Read: Build Your Credit Score Without A Credit Card
7 Ways to Improve CIBIL Score Immediately
1. Set Up Reminders for Punctual Payments
An essential step when thinking how to improve CIBIL score, is maintaining a consistent record of on-time payments. Employ reminders or automated bill payment services to ensure punctual settlements and avoid penalties, contributing positively to your creditworthiness. Late payments incur penalties and result in a lower credit score. Always choose timely payment of EMIs and credit card bills to build a positive credit history and boost your overall CIBIL score. Automated bill payment services are valuable tools to streamline your payment process and eliminate the risk of missed deadlines.
2. Prudent Debt Management
When managing your debts, it's crucial to adopt a strategic approach. Repay one loan before considering another, preventing a cycle of insufficient funds and minimising the risk of a declining credit score. Avoid accumulating excessive debt simultaneously, as multiple loan applications within a short time frame can negatively impact your creditworthiness. Maintaining a balanced approach to borrowing can safeguard your credit score and financial stability. Successfully repaying loans contributes significantly to enhancing your credit score. Focus on timely and complete loan repayments to demonstrate responsible financial behaviour and improve your creditworthiness.
3. Diversified Credit Mix
A well-balanced credit mix involves judiciously combining secured loans (e.g., Home Loans, Auto Loans) and unsecured loans (e.g., Personal Loans, Credit Cards). Striking this balance positively influences your credit score, signalling responsible financial management. The composition of your credit mix plays a crucial role in shaping your credit score. Maintaining a diverse portfolio that includes secured and unsecured loans showcases your ability to manage various credit types responsibly, contributing to a favourable credit rating. Strategically incorporating a mix of long and short tenors for different types of loans helps build a robust credit profile. By carefully selecting and managing various credit instruments, you can enhance your creditworthiness and improve your overall CIBIL score.
4. Credit Applications Within Limits
Applying for new credit requires a thoughtful and measured approach. Avoid creating the perception of constant dependence on credit by limiting the frequency of credit applications. You can mitigate potential negative impacts on your credit score by only seeking new credit when necessary. Understanding the correlation between credit applications and credit score impact is essential. Careful consideration of your credit needs and the associated impact on your score ensures a balanced approach to managing your credit portfolio.
Must Read: Tips for Increasing Your Credit Card Limit
5. Co-signed and Joint Accounts
When involved in co-signed, guaranteed, or jointly held accounts, shared responsibility for timely payments is crucial. Stay vigilant to protect your credit score from potential negative consequences arising from the negligence of joint account holders or guarantors.
Being equally liable for missed payments in shared accounts underscores the importance of cautious involvement in co-signed or joint financial arrangements. Avoiding unnecessary entanglements reduces the risk of adverse effects on your creditworthiness.
6. Regular Monitoring of Credit History
Frequent monitoring of your CIBIL score and credit report is a proactive step toward maintaining accurate and up-to-date credit information. Regular checks allow you to identify and rectify errors promptly, ensuring the integrity of your credit profile. Credit reporting agencies may occasionally introduce inaccuracies or delays in updating your credit records. Regular reviews empower you to identify and address such inconsistencies, preserving the accuracy of your credit history and safeguarding your credit score.
7. Gradual Building of Credit History
While debt is often essential, the key lies in selecting the right type of debt, using it judiciously, and servicing it diligently. Opt for longer tenors when taking loans to maintain lower EMIs, and consider increasing your credit limit. This strategic approach contributes positively to your credit score without necessitating increased spending. Increasing your credit limit doesn't imply spending more; instead, it's a tactic to have more credit while keeping utilisation low. This approach positively impacts your credit score, showcasing your ability to manage credit responsibly and gradually building a favourable credit history.
Conclusion
Improving your CIBIL score is helpful for accessing better financial opportunities in the present time and the future. You can positively impact your creditworthiness by adhering to smart financial practices—such as timely payments, prudent debt management, and diversified credit usage.
Regularly monitoring your CIBIL score and rectifying discrepancies ensures an accurate credit profile. Building a solid credit history gradually and strategically contributes to long-term financial stability. Elevate your financial standing by adopting these practical measures to enhance your CIBIL score effectively.
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