As a chartered accountant yourself, you must be fully aware of the importance of your CIBIL score in a loan application. A CIBIL score is like your report card that lenders evaluate to visit your credit history and understand your financial stability. As a professional chartered accountant, if you find your CIBIL score to be way below the mark, these seven effective tips will help you raise your CIBIL score:
1. Repay Outstanding Debts
Improving and maintaining a healthy CIBIL score becomes fairly easy if one is careful about simple things like paying loan EMIs or credit card bills on time. Sometimes, people tend to pay just the minimum amount due without realising that the interest adds up in the next billing cycle. This will unnecessarily result in a larger volume of debt making repayments difficult and a failing credit score.
2. Avoid Full Credit Utilisation
Restrict your credit usage within the available limit. Using more than 30% of your credit amount will be seen as ‘high credit utilisation’, which will imply poor creditworthiness. For example, if you have a credit limit of Rs 1 lakh, you should try to use just 30% of this sum, i.e., Rs. 30,000 each month. In case, you require a higher credit limit, you may contact your lender for a suitable amount as per your expected expenditures. This way, you can enhance your CIBIL score.
Also Read: What Is Credit Utilization Ratio and How Can You Improve It?
3. Steer Clear of Multiple Debts
Availing multiple credit lines or credit cards, depending on one’s requirement, may seem like a convenient option, especially in case of an emergency. However, indiscriminate use of cards will burden you with further debt garnering a bad CIBIL score. If you have multiple cards, use them judiciously and clear the bills in full before the due time. Securing excess loans from different lenders might affect your score. Therefore, try to close existing loans before you apply for new ones.
4. Vary Your Credit Options
Choose different types of credit to incorporate a mix of long-term and short-term loans, as well as secured and unsecured loans to boost your credit profile. Having no credit history may not serve you well either, since it indicates a lack of experience in handling loans.
5. Maintain Old Debt Records
Individuals should retain records of past debts and active older credit accounts that denote a sound repayment history. Doing so will showcase sensible credit behaviour, thereby raising your credit score.
6. Limit Hard Inquiries
Every time you apply for a Home Loan or other types of loan, lenders need to examine your CIBIL score and credit history. For this, they access your CIBIL report through the credit bureaus, commonly known as a ‘hard inquiry’. Too many loan applications will mean numerous hard inquiries which may lead to a drop in your CIBIL score.
7. Be Wary of Being a Co-Applicant
Applying for a loan as a co-applicant might sound relatively simple, but remember, a delay or default in repayments from the main applicant’s side can severely upset your CIBIL score.
Also Read: Know What CIBIL Score Is Considered Good for a Home Loan
Why is CIBIL Score Important for Chartered Accountants?
The importance of CIBIL scores for Chartered Accountants proves beneficial in the following aspects of a loan:
- Creditworthiness – Your CIBIL score reflects your ability to manage your finances and effect timely settlement of loans. It allows lenders to decide what type of loan they should offer. If you have a good score, you are more likely to be approved for a loan. Whereas, with a low CIBIL score, you may have to endure loan rejections.
- Interest rate – A good CIBIL score raises the credit quality by lowering the loan interest rates. Conversely, a lesser score may fetch you higher rates of interest rendering your loan expensive.
- Loan amount – Your CIBIL score is extremely important because it determines how much money you are eligible to borrow. If you have a favourable score, lenders will gladly extend a bigger loan amount.
- Flexible loan tenor – Borrowers can opt for a longer tenor if lenders are satisfied with their credit score. Thus, they can pay the loan EMIs comfortably.
Also Read: Know How Mortgage Loan Affect Your Cibil Score
Final Words
CIBIL scores are of vital importance when one seeks a loan. Chartered accountants must know how to increase their CIBIL score and further, maintain that score within the optimal range. In this respect, they can check their CIBIL scores on the official website of the four credit bureaus for free once a year. They could also visit credible third party websites to monitor their credit report and CIBIL scores periodically.
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