Your past actions and present behaviour in handling your finances reflect in your CIBIL score report. But, there are a few ways that you can follow to start a journey of achieving a better credit score.
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A lender has some set parameters which decide whether a loan will be issued to the borrower or not. As per the guidelines of The Reserve Bank of India, each bank should keep a check on the CIBIL score of a credit card or loan applicant. Banks evaluate your credit report which has your financial track record and credit history. It is inclusive of your personal information, contact details, information of credit cards, any outstanding balances, and history of your accounts opened. Every organization or party, issuing any type of credit evaluates your CIBIL score.
However, one should know that your CIBIL score won’t improve overnight. It is a cumulative result of consistent financial discipline. Your past actions and present behaviour in handling your finances reflect in your CIBIL score report. But, there are a few ways that you can follow to start a journey of achieving a better credit score. If you are planning to apply for a new loan or credit card, it is important to check your CIBIL score. In case, it is lower than expected, you can follow the tips given below to increase your CIBIL score. Have a look!
Keep a Check On Your CIBIL Score Report
Firstly, you should be consistent with checking your credit score report. It will make you aware of the two things that are of utmost importance regarding your CIBIL score. The first thing is the list of credit cards and loans where you have an outstanding balance, resulting in a low credit score.
Secondly, you will get to know all the information which is included in the credit report. This helps in fixing your credit score. You will have the information about any defaults or delayed payments, which can be rectified by CIBIL or the bank.
Pay Your Credit Card Balance
When you have gone through your CIBIL report, the first thing you need to do is eliminate any outstanding balance. Also, try to spend an amount that you can repay within the billing date. The clearing of balances implies that you pay all the dues of your EMIs and loans.
Have a word with your lender and see if you can negotiate to close the loan account by clearing all the outstanding dues. This is necessary because such dues can negatively impact your CIBIL score. When you clear these balances, it will reflect positively on your CIBIL report.
Tip: It is always better to have a maximum of two credit cards so that it’s easier to keep a track of all your payments
File Disputes For Any Inaccuracies
After the review of your CIBIL report, if you notice any discrepancies in it, dispute it at www.cibil.com immediately. Errors can happen from the lenders as well and the financial institutions must take an action on the disputed transactions. When the discrepancy is resolved, it will increase your CIBIL score. Do not apply for a fresh credit till the existing errors are resolved.
Keep Your Good Debts On The Record
Usually, people believe that it is better to close the old loan accounts which are not in use. This is so because people are unaware of its impact on their CIBIL score. Mostly, when the loans or EMIs of the cars or homes are cleared, people are on the phone to get it eliminated from the credit score report.
However, it is a bad decision to close your debt accounts that reflect positive financial behaviour. Good debts are the credits that you have paid timely in accordance with the conditions, and it is good for your creditworthiness. If you have a long history of good debt, you will have a good CIBIL score too. Keep your good debt accounts open for as long as possible where you have a great repayment record.
Increase Your Credit Card Limit
If you want to instantly cut down your credit utilization ratio and enhance your credit score, apply for increasing the credit card limit. Know that when you ask a bank to increase your credit card limit, it is not certain that you get to spend more than your repayment capacity. Increased credit card limit has many benefits if it is handled properly. It means that you have a good amount of credit exposure but you utilize only the required amount. This keeps your credit utilization ratio low and positively impacts your CIBIL score. Keep in mind to not spend beyond your repayment capacity.
Do Not Risk it at Any Cost
Improving your credit score is beyond your reach if you like taking risks. Two of the highly impacting risks are delayed payments and paying less than usual. Another one that can keep your lender at bay is your habit of taking cash advances. Also, using your cards at businesses having the potential to create money stress like pawn shops can bring down your CIBIL score drastically. Make sure to not give the authorities a record that risks your creditworthiness.
Why is your Credit or CIBIL Score Important?
With lending organizations and banks making their way to the smallest of towns, people perceive that it will be easier to lend money. This is not the case always. Owing to the risk involved in lending money, banks and organizations need to have criteria to evaluate the decision of lending money to businesses or individuals.
One of the biggest determinants in availing of a loan is your CIBIL score. It is, in a way, the first impression of the borrower on the lender. Banks refrain from giving loans to people with a low credit score as this negatively shows the creditworthiness. A good CIBIL score not only gets you an easy loan approval but also helps in getting the best deal on interest rates. Hence, it is important to maintain and improve your CIBIL score.
Conclusion
With the tips mentioned above, you will be able to improve your CIBIL score easily. Remember, that a good credit score shows consistent repayment habits and disciplined expenditure behaviour. Do not think that a bad CIBIL score is beyond repair, it just requires patience and discipline. Keep a track of your CIBIL score, every few months to ensure no discrepancies come up at the time of credit applications.
