In India, there are 4 credit bureaus, and CIBIL is one of them. CIBIL is the platform that prepares reports based on your credit score. CIBIL score aims to reflect your credit history. Basically, Lending institutions use these reports to judge or assess your creditworthiness before approving any kind of loans and other credit-based financial products to you. Lending institutions or lenders are now classifying customers on the basis of their credit score. They allow risk-based pricing on individual loans—the lower the risk, the lower the interest rate, and vice versa. If your CIBIL score is low, then read this blog till the end to know how to improve your CIBIL score. Let’s understand how this score gets calculated.

How to calculate the CIBIL Score

CIBIL scores calculation is based on several factors involving your payment history along with the length of payment history, credit applications, the debt amount, credit mix, etc. All these factors’ weightage differs from each other—credit score worthiness depends upon the score.

CIBIL scores have a certain value that ranges from 300 to a maximum of 900. If your score is between 300 and 600, it is in the poor category, whereas 600 to 700 comes under the average category. If we talk about the minimum CIBIL score for a personal loan, then your score should be 700 and above. 

Now, it’s time to learn about how to improve your CIBIL score.

  Improve your CIBIL score in the following ways:

  • Repaying Credit Card Dues on Time

If you pay your due credit bills, then it can help you to improve your credit score. Paying on time will help you to pay the same amount that appears on the credit statement; otherwise, delay in payment will lead to late payment charges.

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Paying outstanding bills on time prevents interest from rising and assists in improving your credit score in the long run.

  • New Credit Cards

Be careful when you apply for new credit cards, as having so many cards will help you get loans, but having a number of credit cards leads to high-value investments that might prove counterproductive. When you apply for a credit card, it is advisable to check your credit eligibility and apply to banks where your loan application’s chances are higher. Because spending excessive amounts on your credit card and applying for credit cards from different banks can negatively affect your credit score.

Make sure that you keep a reasonable gap between making applications to limit lenders from thinking that you are chasing a loan. Asking for credit cards when you can return them backs to add points and enhance your credit score.

  • Restrict Credit Utilization

Restricting your credit utilization can help you improve your CIBIL score. If you use less than 30% of your credit card limit, it can prevent your credit score from being low. Therefore, it is recommended to pay your credit card dues in advance. Utilizing more than 30% on your credit card is considered as high credit utilization; thus, it is recommended to go for a higher credit limit. This tactic will help you to improve your CIBIL score quickly. But keep in mind that if you apply for multiple loans, it also negatively affects your score.

  • Boost your Credit Limits

As I have mentioned above, if you increase your credit limit, then it directly lower your credit utilization ratio and increase your credit score. If you use a credit limit beyond a certain limit, the credit scoring models categorize you as a high-risk borrower. As you use the entire credit limit (or exceeding a certain limit), your credit utilization ratio expands significantly, increasing the default risks. Consequently, it is recommended to raise your credit limit before any further spending. By doing this, you get the opportunity to keep your credit wisely and maintain your credit utilization low, thus improving your credit score.

  • Keep Old Debt on Your Report
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Your credit score determines the possibility of getting a loan. Therefore it is important to maintain it properly. Your credit score indicates your past credit behaviour, and based on that, the lender accepts the loan application.Hence, having your old good loan account records in your credit report is an excellent practice for your credit score. Another way to improve your credit score is to maintain your good accounts active where you’ve got a reliable repayment history for as long as possible. It is the most common tactic utilized by business enterprises. 

  • Never Give a Hint of Risk

The credit scoring patterns are designed to hit the early signs of stress and uncertainties in the borrower’s profile. For instance, missing credit card payments, suddenly repaying less than the total due amount, or spinning credit is the first indication of stress in the borrower’s credit profile. Other changes such as getting cash advances or using cards at meeting business expenses are hints of increased cash flow.

  • Be Patient and Persistent in Your Approach

A credit score doesn’t increase overnight, and it needs constant effort to fix the credit report and improve it. Hence, you have to be patient and proceed to watch your credit report, your distinct credit lines, spending pattern, and ensure up-to-date payment of a debt. Over time, it will assist in boosting your credit score and improving your creditworthiness.

Improving your CIBIL score is a difficult task but can be accomplished with proper planning and discipline.

  • Clean all credit cards

While using different credit cards, you have to make sure that a lender only lends a loan when he seeks a positive and genuine financial behaviour. Therefore, to leave a great impression, it is imperative to clear off all your credit card dues. Planning strategically will help you to clear your credit card balances before the due date and improve your CIBIL score.

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