5 quick steps to increase your CIBIL Score |
Posted: January 21, 2017 |
Your CIBIL score plays a big role in determining whether lenders will approve or reject your loan application. The score is a numeric expression of a person’s creditworthiness, ranging from 300 to 900. The closer your score is to 900 the more likely it is that banks and other financial institutions will consider your application and extend the required loan amount. It is therefore necessary to have a good score as it will simplify your financial journey. If you have ever been a loan defaulter or have a low score due to some other reason, you must put into practice different measures to increase CIBIL score.
Get into the habit of always paying your bills on time. If you have taken out a loan, you should ensure that all your repayments are made on time along with the interest. When you see to it that all your payments are made before or by the deadline, you will slowly begin to see the three-digit figure go up. Also do not risk being listed as a loan defaulter. When you get marked as a loan defaulter, it will take you considerable time to increase CIBIL score. Set aside some funds solely for the purpose of making loan repayments. By doing this, you minimize the risk of missing out on making payments and being tagged as a loan defaulter.
Checking your credit report on a regular basis is a good practice. A credit report contains details about a person’s credit history. It is quite possible for errors to creep into your report and damage your score. This can happen when your bank supplies inaccurate information or when you fall victim to an incident of identity theft. In the case of identity theft, someone who gains access to your information can open an account in your name, and the new account details will appear on your report. This in turn can hurt your CIBIL score. So when you are regular in checking your credit report, you will be quick to spot any discrepancy. When you find inaccurate information in your report, raise a CIBIL dispute. If the CIBIL dispute is found valid, the correct information will be listed in your report in a matter of thirty days. Getting rid of errors in your report (when it has to do with loans or credit cards) can help increase CIBIL score.
A good mix of secured and unsecured loans can help you increase CIBIL score. The ratio of secured loans must be higher than that of unsecured loans, possibly in the ration of 70:30 or 80:20. When you have too many unsecured loans, lenders are likely to see you as a risky client. Diversifying your credit mix can boost your credit score, provided you repay back your EMIs on time. If you have a good credit mix but fail to pay EMIs, you can be labelled as a loan defaulter and you will see a drop in your three-digit figure. Your credit score gets badly affected when financial institutions mark you a loan defaulter and you would be required to look out for loan for bad credit. You would have to invest considerable time and effort to raise your credit rating and get rid of the loan defaulter tag. Thus it is necessary to have a good credit mix to boost your CIBIL score, provided you make repayments on time.
Always keep an eye on the credit utilization rate. When you have a low credit utilization rate, it will help increase CIBIL score. On the other hand if your credit utilization rate were to rise, your score would go down. Strive to maintain a utilization of 30% or lower so as to reduce the negative impact on your rating. Also, you can consider asking for an increase in the credit limit. An increase on the credit limit of your credit card can help increase CIBIL score, provided you leave the increased limit as it is and not use it for making purchases. Financial discipline is important in your journey of achieving the perfect score. You must learn to control your spending, and not splurge on things you do not really need.
It is important that you never portray a credit hungry behaviour. Do not make the mistake of sending out too many loan or credit card applications at the same time. This is a mistake that many make. Each hard inquiry reduces your score by a few points. When you send out several applications, the impact on your rating will be bigger. Only be sure to apply for those loans or credit cards that you feel sure you will qualify. Conduct your own market research on the different credit providers and compare their requirements and terms and conditions. You can also take the guidance of a credit advisory firm, who will tell you the kinds of credit you can take to help raise the score and that which limits the risk of you getting marked as a loan defaulter.
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