Improving your CIBIL score is essential for obtaining loans and credit cards at favorable terms. Your CIBIL score is a three-digit number that ranges from 300 to 900, with 900 being the highest.
A high CIBIL score indicates creditworthiness and financial responsibility, making it crucial to maintain a good score. Banks and non-banking financial institutions (NBFCs) consider this factor when lending money and deciding interest rates.
Therefore, it’s important to maintain a good credit score, which requires financial discipline. Here are some effective ways to increase your CIBIL score:
Pay Your Bills on Time: Timely repayment of credit card bills, loan EMIs, and other debts is the most crucial factor in determining your CIBIL score. Even a single missed payment can negatively impact your score, so make sure to pay your bills promptly.
Manage Debt Wisely: Excessive borrowing can harm your credit score. Avoid taking on unnecessary debts and seek loans only when necessary.
Maintain a Healthy Credit Utilization Ratio: Your credit utilization ratio is the proportion of your credit card limit that you use. To demonstrate responsible credit behavior, it’s advisable to keep this ratio below 30%.
Limit Credit Inquiries: Each time you apply for new credit, a hard inquiry is made on your CIBIL report, which can slightly lower your score. Limit the number of credit inquiries to maintain a good CIBIL score.
Keep a Healthy Mix of Credit: Having a mix of secured and unsecured credit, such as loans and credit cards, can positively impact your CIBIL score. It shows that you can manage various types of credit responsibly.
Regularly Check Your Credit Report: Monitor your credit report for errors or discrepancies that could be negatively impacting your score. If you find any inaccuracies, report them to the credit bureau to have them rectified.
Avoid Settling or Defaulting on Loans: Settling or defaulting on loans significantly damages your CIBIL score. It’s crucial to honor your repayment commitments and work with your lenders to find feasible solutions if you encounter financial difficulties.
Loan Types Matter: Your CIBIL score is impacted by the loans you take and how responsibly you repay them. Whether you’re taking out vehicle, home, personal, education, credit card, or appliance loans, ensure timely payment of monthly installments (EMIs).
Following these steps can steadily improve your CIBIL score over time. Remember, building a strong credit profile takes patience and financial discipline, but the long-term benefits are well worth the effort.