Improving your CIBIL score in the long-term calls for consistent effort and responsible financial habits. These are some of the key strategies which we list out here.
Thirty one-year-old Ashish Mehra recently discovered that his CIBIL score is only 590, so he asked around the ways to push his CIBIL score higher. He received numerous suggestions and out of what he got, the most common ones included these: paying credit card bills on time, bringing debt level down, increasing the length of credit history and keeping credit mix diverse and so on.
Follow these six strategies to improve your credit score in the long run.
Pay bills on time: Payment history is a significant factor in your credit score. Late payments can have a negative impact, so always strive to pay bills on time.
Reduce debt: High levels of debt relative to your credit limits can lower your credit score. Aim to keep your credit utilisation ratio (the amount of credit you’re using compared to your total available credit) below 30%.
Length of credit history: The length of your credit history affects your score. Avoid closing old credit accounts, as they contribute positively to your credit age and overall score.
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Monitor your credit report: Regularly check your credit report for errors or inaccuracies that could be dragging down your score. You’re entitled to a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year.
Credit mix: Having a mix of different types of credit (e.g., credit cards, installment loans, mortgage) can positively impact your score, as long as you manage them responsibly.
Authorised user: If someone you trust has a credit card with a long history of on-time payments and low balances, becoming an authorised user on their account may help boost your score.
Use credit responsibly: Only borrow what you can afford to repay and avoid maxing out credit cards or carrying high balances. Responsible credit usage demonstrates your ability to manage debt effectively.
Remember, improving your credit score takes time, so be patient and stay committed to these strategies for long-term success.
Frequently Asked Questions:
Why is it important to pay bills on time?
Payment history is a significant factor in determining your credit score. Even a single missed or late payment can negatively impact your score.
Is payment of debt enough to maintain a good CIBIL score?
Paying off debt is indispensable to maintain a good credit score. However, it is a responsible financial management that leads to a good CIBIL score.
How does reviewing credit score help?
It is vital to monitor CIBIL score regularly to track your progress and identify any changes.
How do student loans help establish credit history?
Student loans can help you establish a credit history if they are your first credit accounts. Your payment history, including student loan payments, is one of the most critical factors in determining your credit score.
Do student loans add to the credit mix as well?
Yes, they certainly do. They add diversity to your credit mix especially if they are your only instalment loans.
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Published: 16 Apr 2024, 09:14 PM IST