10 Proven Ways to Increase Your CIBIL Score

Your CIBIL score is a critical factor that lenders consider when deciding whether to approve your loan or credit card application. A good CIBIL score can help you get better interest rates, higher loan amounts, and favorable terms and conditions. On the other hand, a poor CIBIL score can lead to loan rejection, higher interest rates, and unfavorable terms. Therefore, it is crucial to maintain a healthy CIBIL score by following some proven ways. In this article, we will discuss how to increase your CIBIL score.

Pay your bills on time

One of the most crucial factors that affect your CIBIL score is your payment history. Your payment history reflects how timely and regularly you have paid your EMIs and credit card bills in the past. Any late or missed payments can negatively impact your CIBIL score. Therefore, you should always pay your dues on time and in full. Setting up auto-debit or reminder alerts can help you avoid missing payment deadlines.

Keep your credit utilization ratio low

Your credit utilization ratio is the ratio of your total outstanding credit balance to your total available credit limit. It indicates how much of your credit limit you are using at any given time. A high credit utilization ratio can lower your CIBIL score as it shows that you are dependent on credit and may face difficulties in repaying your debts. Therefore, you should keep your credit utilization ratio below 30% by using your credit cards wisely and paying off your balances regularly.

Maintain a balanced credit mix

Your credit mix is the mix of different types of credit that you have availed in the past, such as secured loans (home loan, car loan, etc.) and unsecured loans (personal loan, credit card, etc.). A balanced credit mix can improve your CIBIL score as it shows that you can handle different kinds of credit responsibly. Therefore, you should diversify your credit portfolio by taking both secured and unsecured loans as per your needs and repayment capacity.

Don’t apply for credit frequently

Every time you apply for a loan or a credit card, the lender makes a hard inquiry into your credit report. Too many hard inquiries in a short span of time can lower your CIBIL score as it indicates that you are desperate for credit and may default on your repayments. Therefore, you should limit your credit applications to only when necessary and compare multiple offers before applying.

Check your credit report regularly

You should review your credit report at least once a year to ensure that it is accurate and error-free. Any mistakes or discrepancies in your credit report can affect your CIBIL score adversely. If you find any errors or discrepancies in your credit report, you should raise a dispute with CIBIL or the concerned lender and get them rectified as soon as possible.

Don’t close old credit accounts

Your credit history length is the duration of your credit history, which is measured from the date of opening of your first credit account. A longer credit history can boost your CIBIL score as it shows that you have a track record of managing credit well. Therefore, you should maintain old credit accounts that have a positive payment history and avoid losing them unnecessarily.

Keep Old Credit Accounts Active

The duration of your credit history also plays an important role in determining your CIBIL score. Credit history length refers to the duration of your credit history, which is measured from the date of opening of your first credit account. A longer credit history can boost your CIBIL score as it shows that you have a track record of managing credit well.

Therefore, it is advisable to maintain old credit accounts that have a positive payment history and avoid closing them unnecessarily. This will not only improve your credit history length but also add to the credit mix, which is another important factor in calculating your CIBIL score.

Limit Your Credit Applications

Every time you apply for a loan or a credit card, the lender makes a hard inquiry into your credit report. Too many hard inquiries in a short span of time can lower your CIBIL score as it indicates that you are desperate for credit and may default on your repayments.

Therefore, you should limit your credit applications to only when necessary and compare multiple offers before applying. Also, make sure to read the terms and conditions carefully and understand the eligibility criteria before applying for any credit.

Use Credit Monitoring Services

Credit monitoring services are online platforms that provide you with regular updates on your credit score and report. These services also alert you in case of any changes or updates in your credit report, such as a new loan or credit card application, or a default.

Using credit monitoring services can help you keep track of your credit behavior and take corrective measures in case of any discrepancies or errors in your credit report. Some of the popular credit monitoring services in India are CreditMantri, CreditKarma, and Paisabazaar.

Consult a Credit Counselor

If you are facing persistent issues with your credit score and are unable to improve it on your own, it is advisable to consult a credit counselor. A credit counselor is a financial expert who can analyze your credit report and suggest personalized solutions to improve your credit score.

Credit counseling is a paid service, but it can be a worthwhile investment if it helps you improve your credit score and get better terms and conditions for loans and credit cards. Make sure to choose a reputable and experienced credit counselor who has a good track record of helping people improve their credit scores.

Conclusion

Your CIBIL score is a crucial aspect of your creditworthiness and financial health. A good CIBIL score can help you get faster approvals, lower interest rates, and better terms and conditions for loans and credit cards. Therefore, it is essential to maintain good credit behavior and take proactive steps to improve your CIBIL score if needed.

By following the tips mentioned in this article, you can increase your CIBIL score and build a strong credit profile. Remember to check your credit report regularly, pay your dues on time, maintain a low credit utilization ratio, and diversify your credit portfolio. With patience and perseverance, you can achieve a good CIBIL score and enjoy the benefits of a healthy financial life.