Top Factors That Improve Your CIBIL Score

A CIBIL score report talks about an individual’s creditworthiness. In other words, it means that this report helps a financial institution determine its capabilities to repay the loans on time. While a good credit score on your report will help you qualify for a loan instantly, there can be situations where you lack one.

However, the good news is that you may easily remedy the score by implementing a few tactics; what we call disciplined credit management. Disciplined credit management is nothing but following a few financial practices that will help you improve your credit scores.

A low CIBIL score is an alarm for you to start focussing on your credit health. Though you cannot fix this score overnight, it is a good idea for you to start working on a few steps immediately. Most likely, you will need around 4 – 6 months to work on restoring your credit score. Discipline, patience, and focus are the keys to achieving your goal. For this, you need to check your CIBIL score regularly and work to improve it.

So let us dive deeper into how to make these considerable changes and improve the scores.

How to Improve your CIBIL Score?

Make your Payments on Time!

Bill overdue significantly impacts credit health, and therefore, it is important to pay attention to clearing your dues each month on time. A delay in the EMI payments attracts a penalty, but that is not all. It lowers your credit score too. Therefore, it is a good idea to set reminders for your payments. You may also fix a payment schedule date. This way, you will be able to tackle all the payments on time.

Apply for Long Tenure Loans

A long tenure loan clearly means that you are opting for a lower EMI. This way, you can rest assured of making hassle-free payments on time. Any delay or skipping of EMI’s impacts your credit score directly. So, always choose a loan tenure that you can comfortably deal with.

Do Not Apply for Multiple Loans

Taking multiple loans simultaneously gives out the impression that you are forever in need of funds. This does not leave a good mark on your credit health and financial institutions. Multiple loans can also lead to a situation where you might fall short of funds and miss out on making your payments on time. It also results in lowering your credit score, which is obviously not something that you would want. The best way is to take one loan at a time and make the payments regularly.

Use Older Credit Cards to Maintain the Credit History

An old credit card obviously shows your credit history for the longest time. This works in your favour of getting a good score any day. So, ensure that you pay your bills on time and maintain the credit card.

Customise the Credit Limit on Your Credit Card

Maintaining credit health is entirely in your hands. Try and talk to your transacting bank or the loan lender to customise your credit limits based on your expenses each month. You need to ensure that you do not reach the given credit limit each month. Do not max out your credit limit as it shows poor financial management.

Check Your CIBIL Scores Regularly

Did you know that you can check your CIBIL score for free? Yes! You may check your CIBIL score report for free on a one-time basis. This will help you get an idea of your credit standing. 

What are the Benefits of a Good CIBIL Score Report?

A high credit score has a host of benefits that can drastically improve your financial life. CIBIL (Credit Rating and Information Bureau of India Ltd.) maintains a database of the credit scores of both individuals and commercial entities. A credit score can range anywhere between 300 to 900, and a score above 750 can be considered a good credit score. Check your CIBIL score online and know what your credit score is.

A good credit score can help you in many ways. Let us look at the benefits-

• High credit card limit
• A discount on the processing fees for credit cards and loans
• You have the power of negotiation in your hands
• Quick approvals on new or add on credit cards
• Long tenure loans
• Pre-approved loans
• A bunch of benefits with your credit cards
• Reward points
• Cheaper or low-interest rates on loans

Remember – Focus, self-discipline, and patience are the keys to a successful credit score.

Now that we have gained knowledge on the benefits of a good credit score let us know why you have a bad credit score.

What Factors Affect Your CIBIL Score?

Your CIBIL score report reflects your financial health. A slight change in your financial moves can have a great impact on your credit score. 

The major factors that play a role in affecting your credit score are –

1. Credit card and repayments
2. Loans and repayments
3. Your existing debts
4. Any delays, defaults, or time-lapse in the repayments
5. Loan rejections, if any
6. Your income
7. Credit Utilization Ratio

While these are the factors that affect your credit scores, many others have no impact. For example, your savings account, cheque bounces, overdrafts, fixed deposits, etc., do not affect your credit scores in any manner.

Your Credit Bureau Score must be on the higher side. It ensures that you have impactful credit health and are eligible for a higher loan amount in the future.

How to Check Your CIBIL Score for Free?

Checking your credit score has now become easy. You can request a free detailed credit report from the credit card bureaus once in a calendar year. So all you need to do is visit the official CIBIL website to get your free CIBIL score report.

Take the first step to improve your scores from here and then apply for unlimited access to your credit report after 3 months by paying Rs 550 for one month or 1200 for a year. By checking your credit report regularly, you can easily rectify your mistakes and improve your scores. However, please remember that the scores do not get updated immediately. You may fill in the CIBIL Dispute resolution form online if you notice a delay in updating the records or any incorrect information in the credit report.

What are the Characteristics of an Individual with a Good CIBIL Score?

Choose to Have Multiple Forms of Credit to Create an Impactful Credit History 

Imagine you have not taken any loans in the past. This obviously shows that you do not have a credit history, and therefore, you will have a low credit score. Try creating a financial record with a mix of credits, short-term, and long-term loans. Plan well in advance for the same and work on paying the EMIs regularly. This way, you can start building an impactful credit history that will help you get bigger loans in the future too.

Keep an Eye on the Joint Credit Spending

If you hold a joint spending account, you need to be double cautious about your financial management. Defaulting a payment may not be your way but can land you in trouble if the joint spender does it. So, make sure that you stay away from applying for join credit terms as it can negatively impact your credit health.

Close any Long-Standing Loans 

A long-standing loan with multiple delays in payment clearly states that you have been unable to manage your financial health properly. Close any such loans immediately. Also, ensure that you do not have multiple liabilities. These factors have adverse effects on your credit health instantly and lower your scores. 

Did you know that clearing an overdue debt can have a positive impact on your credit history? Well, it does. Bringing down your credit card balance or closing a long overdue loan ideally clears a huge debt off your shoulders. This way, it also helps to improve your credit scores.

Do not Have a No-Credit History

Having a no-credit history states that you do not carry any financial credit history as a loan applicant. In other words, you have not taken any loans in the past or made any purchases that required credit. While this might be a good thing to look at as you do not have any liabilities, the flip side of this history is that you carry a risky financial profile. This can be a problem if you want to apply for a loan in the future.

What are the Common Mistakes that Lead to a Low Credit Score?

Having an ideal Cibil score report does not mean that it will continue to be always the same. You need to ensure that you follow certain practices to maintain the score and let it get affected.

Here are a few common mistakes that you can avoid easily –

• Missing bill payments
• Delay in paying the EMIs for a loan
• Max out credit card limits
• Applying for multiple credit cards or loans
• No credit lines or loans; not maintaining a credit history
• Not checking the Cibil Record regularly

These are some of the most common mistakes that you can easily avoid in your everyday life. Follow these practices regularly to improve your scores over a period of time. However, you need to understand that nothing can happen instantly. There cannot be any immediate drastic change in your scores. So, give yourself at least 6 months to a year for your credit scores to improve.

Conclusion

A good credit score is a gateway to show your creditworthiness to financial institutions. The higher your credit score, the better it is. Banks and loan lenders evaluate your financial health with the help of your credit report, and therefore, it directly impacts the probabilities of getting loan approvals. Of course, there can be many reasons that can affect one’s credit health. However, the good news is that you can easily improve your credit scores by following a few financial practices and making the necessary shifts. Though this takes a bit of time, acting on improving your credit scores at the earliest is imperative. So check your CIBIL score regularly and make the best decisions to help you in the long run.

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