Improving your CIBIL score, or credit score, is essential for accessing credit at favourable terms. These favourable terms are loan at lower rate of interest and less documentation.
Giving impetus to your score may not be as easy as it seems, but after proper planning, it is not too difficult either.
Some tips to improve your CIBIL score quickly:
Bills on time: Payment history is a significant factor in your credit score. Ensure you pay all your bills, including credit card bills, EMIs, and utility bills, on time. Setting up automatic payments or reminders can help you stay on track.
Cut down your credit utilisation ratio (CUR): You should aim to keep your credit card balances low relative to your credit limit. Ideally, try to keep your credit utilisation ratio below 30 percent. Paying down existing debts can help lower this ratio.
Avoid applying for new credit: Each time you apply for credit, it triggers a hard inquiry, which can temporarily lower your credit score. Limit new credit applications, especially if you’re planning to take out a significant loan soon.
Diversify your credit mix: Having a mix of different types of credit accounts, such as credit cards, loans, and mortgages, can positively impact your credit score. However, only take on credit that you can manage responsibly.
Regularly monitor your score: Keep track of your credit score regularly to monitor your progress. Many banks and credit bureaus offer free credit score monitoring services.
Address negative items: If you have any negative items on your credit report, such as late payments or defaults, work on resolving them. This may involve negotiating with creditors or setting up payment plans.
Keep old accounts open: Closing old accounts can shorten your credit history and potentially lower your score. If you have old accounts in good standing, consider keeping them open to maintain a longer credit history.
Seek professional help: If you’re struggling to improve your credit score on your own, consider seeking help from a credit counselling agency or financial advisor. They can provide personalised advice and assistance in improving your credit.
Remember that improving your credit score takes time and consistent effort. There are no quick fixes, but by following these tips, you can raise your CIBIL score and improve your financial health.
FAQs:
To improve your credit score, what is the first thing borrowers should do?
First and foremost, borrowers should check their credit report. They should obtain a copy of their credit report from CIBIL. They should also review it for any errors or discrepancies that could be dragging their score down.
Does applying for new loan impact the credit score?
Each time you apply for credit, it triggers a hard inquiry that can temporarily lower your credit score. So, it is advisable to limit new credit applications, particularly if you’re planning to take out a significant loan soon.
Is this important to diversify your credit mix?
It is advisable to have a mix of different types of credit accounts, such as credit cards, loans, and collaterals, which can positively impact your credit score.
How does the score impact the rate of interest?
Lenders often offer better terms such as lower interest rates and fees to the borrowers who have high CIBIL score.
Why are banks lenient towards borrowers with high CIBIL score?
Primarily because they are seen less risky and the chances of their default are almost nil.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Download The Mint News App to get Daily Market Updates.
Published: 06 Mar 2024, 04:57 PM IST