How to Increase Your CIBIL Score and Unlock Better Credit Options

Introduction

Your CIBIL score is essential in your financial journey because it reflects your creditworthiness. It affects everything from loan approvals and interest rates to insurance premiums. A higher score increases your chances of securing loans at favourable interest rates and getting approved for credit cards. Therefore, a healthy CIBIL score is important. But how do you achieve this, especially if your score needs improvement? Don’t worry; Here’s a detailed guide on how to increase CIBIL score.

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Understanding CIBIL Score

CIBIL Score, a three-digit number ranging from 300 to 900, is calculated based on your credit history. It reflects your ability to repay borrowed funds and is used by lenders to assess the risk of lending to you. A score above 750 is generally considered good.

How to Increase CIBIL Score?

Below are a few tips to help you increase your CIBIL Score:

• Pay Your Payments on Time: On-time payment is the golden rule. Only timely or missed EMIs and credit card dues significantly impact your score. Set auto-payments or calendar reminders to ensure timely payment. Even a single delay can cause a setback, so be cautious.

• Clear All Your Credit Card Debt: High credit card utilization, more than 30% of your credit limit, negatively impacts your score. Ideally, pay off your credit card balance in full every month. If that’s impossible, prioritize paying them off quickly while keeping utilization low.

• Check Your Credit Report Regularly: Errors in your CIBIL report can unfairly reduce your score. Review your reports regularly and dispute any discrepancies you find. CIBIL provides a dispute resolution process to rectify these mistakes.

• Create a Balanced Credit Mix: A mix of secured loans (like home loans) and unsecured loans (like credit cards) reflects responsible credit management. This variety can have a positive impact on your score.

• Avoid Applying Too Much Loan Application: Multiple loan applications in a short period can be seen as a sign of loan hunger, which can lower your score. Avoid applying for multiple loans at once. Research and choose the lender that best suits your needs.

• Be Strategic With Increasing Credit Limit: Increasing your credit limit can improve your credit utilization ratio if you maintain low spending. However, only be tempted to spend within the limit. Use it responsibly to showcase your credit management skills.

• Patience is Key: Building a good CIBIL score takes time and consistent effort. Don’t be discouraged if you don’t see immediate results. Stick to these practices, and you’ll slowly see positive changes in your scores.

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Additional Tips to Improve CIBIL Score

Below are some of the additional bonus tips to improve your CIBIL score:

• Financial Education: Understand the factors that affect your credit score and stay informed about financial products and best practices.
• Workshops and Seminars: Attend financial literacy workshops and seminars to increase your knowledge.
• Credit Counselors: If you’re struggling to manage your debt and improve your score, consider seeking help from a credit counsellor.
• Financial Advisors: They can provide tailored advice based on your financial situation.

Conclusion

Improving your CIBIL score requires diligence, responsible financial behaviour, and regular credit report monitoring. Following the above mentioned strategies can gradually increase your CIBIL score and enhance your creditworthiness and financial stability. Remember, a high CIBIL score doesn’t just mean easily getting loans and credit cards; it reflects your overall financial health and discipline. Get started today to build a better financial future.

Also Read: How to Check CIBIL Score?

How to Increase CIBIL Score? FAQs

1. How often should I check my CIBIL report?

Ans. It is wise to review your CIBIL report at least once every year. This allows you to identify and dispute any errors affecting your score.

2. What are some ways to make sure my payments are always on time?

Ans. Here are a few tips:

• Set up auto payments: Many lenders offer automatic payment options. Utilize them to ensure timely deductions from your account.
• Use calendar reminders: Schedule reminders for upcoming due dates to avoid unintentional delays.
• Maintain sufficient funds: Ensure your bank account has enough balance to cover the EMI or credit card dues before the due date.

3. How much debt is considered too much for a good CIBIL score?

Ans. Ideally, you should keep your credit utilization ratio (credit used divided by credit limit) below 30%. The lower the ratio, the better your score.

4. I’ve cleared my credit card debt. Will my score improve immediately?

Ans. It may take a few months to see the full impact on your CIBIL score. However, continued timely payments going forward will certainly contribute to positive growth.

5. Will closing unused credit cards improve my score?

Ans. Closing unused credit cards can have mixed effects. A long credit history with responsible management is generally viewed favourably. However, if the card has a high credit limit and contributes significantly to your overall credit utilization, closing it may negatively increase your ratio. It is best to consider the advantages and disadvantages of any account before closing it.

6. What are some secured loan options that can help build my credit score?

Ans. Secured loans like fixed deposit (FD) or gold loans can be good options. You borrow money against collateral (FD or gold), and timely repayment contributes positively to your credit history.