Highlights Section
- What is Considered a Good Credit Score?
- What are the Factors Affecting CIBIL Score?
- 10 Ways to Increase Your CIBIL Score Above 800
- Benefits of Maintaining a High Credit Score
CIBIL score, also known as credit score, is a major concern when you are planning to get a loan, particularly a housing loan. Financial institutions and banks check the CIBIL score before approving a loan – a three-digit number representing the applicant’s creditworthiness.
Tips to Improve Your CIBIL Score
Following these steps can help you take your CIBIL score to 800, making loan application easier and hassle-free –
1. Analyze Your Credit Report
As a credit-card holder, the first thing you must do is clear default or delayed payments and analyze the credit report because sometimes the paid amount does not reflect on your account. In such cases, you can get in touch with the bank or the financial institution and get it rectified on time.
2. Increase the Credit Limit
If you have a credit card with a credit limit lower than your eligibility, you must request the lender to increase the credit limit. This will lower credit utilization drastically and place you in a favourable spot as someone with controlled expenditures. An increase in the credit limit will result in a positive score.
3. Choose a Longer Tenor
Opting for a longer repayment tenor effectively reduces the EMI thus lessening the burden of your shoulders. This makes it easier to pay off the loan amount without any defaults and makes way for a better credit score so you can get the desired loan without much difficulty.
Additional Read: How to Pick the Right Home Loan Tenor
4. Opt for a Healthy Mix of Credit
A healthy credit mix of unsecured and secured loans will give your credit score the right kick. Having a combination of a mortgage loan, personal loan, auto loan, and so on, is generally considered a good mix of credit that is sure to keep the CIBIL score in good standing.
5. Keep Track of Your Old Debts
Keep a record of all the successful payments made in the past in your credit report. This will give the lender a positive impression of you as someone who settles dues and they will see you as a reliable, low-risk customer.
6. Avoid Credit Card Cash Advance
Cash advances on a credit card means you are not a pro at managing finances. Not only does it affect the CIBIL score but also lowers it significantly. Getting a loan on a credit card is therefore the last choice as the rate of interest goes higher than usual, making it an alternative only when there is an urgent need for cash.
7. Use Credit Cards
If you wish to improve your CIBIL score, you must actually start using your credit card – albeit diligently. You can begin by making low-ticket online purchases using your credit card and repay the amount at the earliest. This will reflect well on your credit history and add to your credit score.
8. Make Timely Payments
One of the key factors that decide your credit health is your debt responsibility. Ensure that you are able to keep with all your EMI commitments and repay any amount owed on time.
9. Avoid Hard Loan Enquiries
Another thing to bear in mind is that every time you make a hard loan enquiry, your credit score may be affected. Ensure that you only make loan enquiries when you’re sure of your loan eligibility and have conducted your research, so you minimise multiple enquiries at the same time.
10. Stay Vigilant as a Co-signer
Even if the loan amount is not in your name, if you’re a co-signer, any default in loan payments will also have an impact on your credit score. Co-sign loans with borrowers whom you trust and stay updated on the repayment plan.
Additional Read: Smart Things to Consider Before You Apply for a Home Loan
What is Considered a Good CIBIL Score?
The CIBIL score ranges from 300-900 but the higher the number, the better the chances of getting the loan approved. Most lending institutions consider 750 or higher the ideal score for faster, smoother loan approvals. If your CIBIL score falls below the desired limit, you still have a chance by raising it to 800. Continue reading to learn how to improve your CIBIL score immediately using the steps outlined above.
| Credit Score (Range) | Remark |
|---|---|
| 800+ | Excellent |
| 740-799 | Very good |
| 670-739 | Good |
| 580-669 | Fair |
| Less than 580 | Poor |
As a potential borrower, it is always a good idea to know your CIBIL score and find out which category you belong to before applying for a loan. For those with a credit score below 670, applying for a loan could be challenging owing to the fairly poor score. Nevertheless, one should analyze the report and address the factors that could possibly be affecting the CIBIL score.
What are the Factors Affecting CIBIL Score?
Before moving on to how to improve CIBIL score, here is a look at the factors that affect the credit score in the first place –
- Credit utilization ratio
- Outstanding debts, credit card bills, loans
- Number of credit applications
- Accuracy of the credit report
- Credit mix
- Length or duration of credit history
- Closing of previous credit card account(s)
Applicants need not stress over the factors listed above since there are surefire ways to get your CIBIL score in good shape.
Benefits of Maintaining a Good CIBIL Score
While a poor CIBIL score can make your financial purchases a burden, a good credit score can benefit you in more ways than one. The top benefits of maintaining a high credit score include the following –
- Affordable interest rates
- Increased chances of qualifying for a credit or loan
- Prompt job approvals
- Larger limits on credit and card
- Better range of credit card rewards
- Easy approvals on rental apartments
- Cheaper insurance rates
- Lack of security deposits on utilities
Automated EMI repayments, timely payments on credit card bills, disciplined expenditure, and appropriate financial management help to maintain a positive CIBIL score above 800. It may not be an easy task to monitor but with these 10 proven methods listed above, one can surely achieve a score of 800+. Applicants can check free CIBIL score on the lender’s website or free of cost.
Also Read: How to Check Your CIBIL Score for Free?
Dos and Don'ts of Increasing Your CIBIL Score
Do’s
1. Make timely repayments
The most critical component that comprises a credit score has to be timely repayment. If you have been diligent in repaying your credit card bills and your loan EMIs always on time, your credit score will move in the positive direction. On the other hand, missed or delayed payment accumulated over time can affect your credit score.
2. Restrict your credit utilization to 30%
The ratio of the amount you spend every month from your credit to your actual credit limit is called the Credit Utilization Ratio. In terms of percentage, it should be under 30% - meaning, if your credit limit is Rs.1,00,000 you should spend only up to Rs.30,000 in a month and repay the amount. Spending more than the prescribed limit indicates that you have a high dependency on credit, which can be considered risky by the lenders.
3. Check your credit report regularly
Checking your credit report on a regular basis gives you an idea on your financial position with the lenders. It also lets you identify any unknown activities taking place in your account such as a transaction you are not aware of or a mistake that is still not rectified.
4. Maintain a mix of secured and unsecured credits
Having a healthy credit mix involves using a combination of secured and unsecured loans of short- and long-term tenors, in your portfolio. This shows the lender your ability to handle various types of credit with equal ease. If you have been able to repay the debts on time, it establishes you as a credible borrower too.
Don’ts:
1. Apply for multiple credit simultaneously
If you apply for credits excessively or with multiple lenders at the same time, it shows a credit hungry behavior to the lender. This creates a negative impression on the lender, and they become skeptical to extend a credit to you.
2. Close old accounts
Did you know that your old accounts can very well be ‘gold’ accounts – meaning that they hold a good value in credit score as they indicate a long credit experience. Hence, closing old credit accounts can adversely affect your average age of credit history.
On the other hand, having a long credit history especially with timely repayments can greatly improve your credit score and help secure loans in the future easily.
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