Elevate Your Financial Profile: Strategies to Improve CIBIL Score
When an individual applies for a home loan, property loan, personal loan or any other loan type, one of the first things that a lender does is understand the loan applicant’s creditworthiness and repayment capacity. The number that helps them understand this is called the CIBIL score. An individual’s CIBIL score is a statistical representation of their repayment capacity and creditworthiness.
A CIBIL score between 750 and 900 is considered very good. Such a credit score is the mark of a borrower who can be entirely trusted with timely repayment of loan money. Therefore, loan applicants with very good credit scores not only get approved for loans quickly but are also able to avail of these loans on the most favourable loan terms and conditions. Credit users are thus advised to maintain a CIBIL score above 750. If your CIBIL score is below 750, here are some very simple strategies to help you improve your CIBIL score.
Strategies to Improve CIBIL Score
1. An individual’s repayment history makes up 35% of their credit score and is the most important factor that affects their credit rating. To improve your CIBIL score, one of the first things that you must do is get into the habit of paying loan EMIs and credit card bills on time. Set up phone reminders so that you don’t miss due dates. If you have too many loans, consider consolidating your debt so that loan repayment remains simple for you. If you do miss a due date, clear the pending EMI or credit card bill as quickly as possible to minimize damage.
2. Individuals who are excessively dependent on credit are considered high-risk borrowers by lenders and credit information bureaus and therefore, such individuals have a low CIBIL score. To ascertain your dependency on credit, lenders assess the number of hard enquiries under your name. They also check your credit utilization ratio. Having a credit utilization ratio below 30% and a limited number of hard enquiries will help you improve CIBIL score.
3. Loans are of two types: secured and unsecured. Loans that are backed by collateral or security are called secured loans. Home loans and loans against property are all types of secured loans. Unsecured loans are loans that do not involve any collateral. Personal loans are a type of unsecured loans. Having both secured and unsecured loans establishes an individual’s ability to handle all kinds of debt. Therefore, people who have both types of loans have a high CIBIL score.
4. Individuals trying to improve their CIBIL score must also check their CIBIL report from time to time for errors. Sometimes errors cause a person’s CIBIL score to go down. Such errors must be reported immediately as their rectification easily takes a few weeks.
5. Lastly, closing one’s old loan accounts and credit cards causes one’s credit history to get deleted and since an individual’s credit history directly impacts their CIBIL score, one must never close old loan accounts and credit cards.
Doing these simple things will certainly help you improve your credit score in only a few weeks
