Must Knows

How to improve your CIBIL credit score?

[] It is not possible to increase and improve your CIBIL score overnight. Many factors have to work together for that to happen. 

What is a CIBIL score?

A credit score is given to every individual with a bank account to determine the eligibility to apply and get approved for loan and other credit facilities. CIBIL is an Indian credit bureau that provides credit scores to people. This credit score reflects your credit history which includes all credit facilities used or misused like loans and credit cards. Credit scores are important because they determine how much debt you can take and how much interest the bank or NBFC may levy on you. A poor credit score will result in high interest rates and a lower loan amount.

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How can you calculate your CIBIL score?

CIBIL scores are usually placed within the 300-900 ranges. The exact calculation is a mixture of various aspects of your credit history and risks that you have taken in your financial investments. Some of the aspects which affect your credit score calculations are:-

  • Repayment made against credit
  • Credit card payments
  • Loan applications
  • Existing debts
  • Unpaid debts
  • History of repayments and their frequency

The exact method of calculation is extremely complicated. The aspects mentioned above are considered with much more facts, and weightage varies from one factor to another. Credit scores are calculated every year with a credit report being published and available for review.

How to improve CIBIL score immediately?

Having a good credit score affects the ability to procure loans at the best interest rates. The total credit value drops with the decrease in one’s credit score. If you’re wondering how to increase CIBIL score, take a look at these pointers to have a good credit score.

Make timely credit card payments

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The most important and foolproof way to improve your credit scores is to make repayments on time. Delayed repayment is the worst blow to the credit card score. CIBIL considers pending repayments highly risky and as a result, you might lose a lot of scores. In case you cannot meet the full repayment, only the basic due can be paid to avoid being marked as a risk. However, it is not advisable to continue this practice as it will be picked up by CIBIL.

Do not use up your credit card 

Having a credit card does not mean you always have the luxury to spend money to the maximum limit. Avoid maxing out your cards to not count as an overspender and be knee-deep in debt. It is recommended to leave a 30% gap between your credit due and the maximum credit limit. Maxing out cards on multiple occasions should be avoided at all costs as it hints at bad financial decisions.

Do not take too many credit cards

It’s always advisable to avoid taking too many credit cards. When you combine the maximum limit of multiple credit cards, it may show that you have overspent on them. Having credit cards in multiple banks should also be avoided as it reflects badly on your credit score. Have a limited number of cards under one bank. Rejection of credit card applications by the bank may also affect your credit score negatively.

Keep track of your credit reports

Sometimes your credit report may have discrepancies and problems, displaying your credit scores incorrectly. You should always try to review your credit reports to see if there is any error or miscalculation which might unfairly reflect on your credit scores. Having errors in credit reports is fairly common which is why CIBIL allows you to review and check your report once a year.

Avoid having zero credits

Not taking credit due to the fear of having a bad score is unhelpful. You should have a few loans paid off to assure your reliability to your lender. People who do not take credit consciously may end up being labelled as high-risk borrowers due to a shortage of records which prove their timely repayments.

Increase credit card limit consciously

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By increasing the credit card limit, you can avoid over utilising your credit card limits. Going beyond your credit card limit often reads as a risk in calculating one’s credit score. Therefore, you must try to increase the credit limit to avoid getting into situations which might be considered as risks.

Try not to leave space for risks

Credit scores do not solely depend on the final timely payment within the closing date of the tenure. Any delayed repayment, even in 1-2 months can cause risk detection and decrease your score. Do not try to find loopholes by paying less in repayments of credit card dues. At least pay the basic dues to avoid having bigger issues.

Limit having numerous credit card lines

Many people prefer using credit lines to increase their credit limits. However, this practice can have adverse effects and harmful consequences on one’s credit scores. Creating new credit card lines results in hard inquiries. Too many of these hard enquiries over time may badly affect your chances to secure loans. Rejection of loan appeal will also severely affect your CIBIL scores.

Include information on old loans

While old loans may mean financial risks to you, they will help you improve your credit score. Since the credit score is calculated and set by the weight of your credit repayment abilities, old loans may just be the best opportunity to boost your score. If you can show i old loans and timely repayment, your ability and punctuality will be proved.

Adopt multiple strategies and patiently wait for results

It is not possible to increase and improve your CIBIL score overnight. The CIBIL score gets easily affected by mistakes and risks on your part. However, rectifying the credit score can take a long time. You may need to adopt multiple strategies and develop your score slowly over time.

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Category: Must Knows

Debora Berti

Università degli Studi di Firenze, IT

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