Tips to Increase CIBIL Score
Your credit score is a 3-digit number calculated by the Credit Bureaus based on the information available on your credit report. Knowing how to build your credit score is essential if you wish to increase your chances of getting approved for credit products such as a credit card, or loan.
“Take care of the small things and the bigger things will take care of themselves”. This quote can be applied to a variety of areas in our lives. Taking small steps to increase your CIBIL score could increase your chances of getting a credit card with a higher limit or a loan at the best available rate. Lending or credit card companies are more likely to approve your application if you have a high credit score. The reason being a good credit score indicates that you can efficiently repay whatever you intend to borrow using their credit products.
A credit score is not set in stone. If you have a low score and you want to increase your CIBIL score, here are a few tips that can help you climb the score ladder:
Check your credit score regularly
Checking your credit score regularly will help you stay on top of your finances as you can easily identify the areas where you need to work. Monitor your credit score regularly and opt for a soft credit check as it doesn’t impact your score. Also, there could be errors on your credit report, leading to a drop in your score. To increase your CIBIL score, review your credit report from time to time and if you find any errors, submit a CIBIL dispute resolution form online. This will help you get your credit report corrected.
Have a diverse credit accounts
“Don’t put all your eggs in one basket”. Maintaining a balance between various types of credit is one of the best ways to increase your CIBIL score. Create a diversified blend of credit products according to your spending habits and financial goals. For example, you might have a credit card, and a short-term loan. Keep paying the debts on time and in full to increase your CIBIL score.
However, do not take a new credit product if you are not sure about the repayments. Apply for a credit product only when you think you can repay the debt on time.
Ensure paying your debts on time
“Pay your credit card bills on time” sounds customary. However, this is one of the small steps that will help you increase your CIBIL score. Timely repayments have a big impact on your credit report. Hence, make sure to pay off your debts on time. If you fail to pay the credit card company or any lender on time, the next time you apply for a credit product, your application stands a chance of being rejected due to low creditworthiness.
Set up autopay
If you skip your deadlines and end up hurting your credit score, set up autopay for your debts. This will eliminate the possibility of you not repaying on time. And in turn, your credit score will increase over time. You can also set up reminders on your mailbox or smartphone that will remind you to make timely payments.
Have older credit cards
Having an old credit card shows that you are a reliable borrower with a lengthy credit history. Also, it indicates your ability to manage your finances smoothly. To increase your CIBIL score, keep an old credit card and use it as meticulously as possible so that you end up with a good credit score.
Use less than or equal to 30% of your credit limit
Your credit utilization ratio should always be less than or equal to 30% if you want to increase your CIBIL score. If you spend more than that, it shows that you are highly dependent on credit. This may lower your credit score. Use only 30% of the assigned credit limit to stay on top of your finances. If you are an impulsive spender, then you can always contact your credit card company and ask for a credit limit customization.
Avoid taking multiple loans at a time
Do not apply for credit products intermittently within a short period of time. If you apply for multiple credit products in a short duration, your credit score will go for a toss. Lending companies or credit card companies may consider that you are struggling with your finances. And hence, they may limit their offerings in terms of assigned credit limit or interest rate for a loan.
Lending companies consider you as a borrower with low risk if you have a better credit score, so you're more likely to get approved for loans. This is because a good score implies that you have a track record of appropriately managing your credit, such as making timely payments. You cannot increase your CIBIL score overnight as it is a time-consuming process that also demands financial discipline. It can take several weeks for information on a new loan or credit card to appear on your credit report, so you may need to wait at least that long to see your CIBIL score increase.