Generally in India, based on the CIBIL report that is, the increase of credit score will help the lenders to decide to give loans to borrowers or not. In this article, we are going to explore what is good credit. Then also going to see about how to increase and improve the CIBIL score /credit score.
What is a Good Credit Score?
A good credit score or CIBIL score is a numerical representation of the creditworthiness of a loan. A higher credit score indicates a good reputation and responsible for the money, which has been credited in the past. In India, credit score contains 3 digit numbers ranges from 300 to 900, which will reflect your credit history. Moreover, if you have a higher credit score, which is 700 or above, then it will be easier to get a loan. Moreover, it will be calculated based on the credit records which include total debt, credit history, the behavior of money repayment, etc. Credit score will be calculated by CIBIL, so it is also known as CIBIL Score.
There are four bureaus in India and they are CIBIL(Credit Information Bureau (India) Limited), Equifax, CRIF Highmark, and Experian. The above central bureaus are licensed by the Reserve bank of India (RBI). The only difference between credit score and CIBIL score is that credit score can be given by any 4 types of bureaus in India. But CIBIL will provide only the CIBIL score. Most bankers will refer to CIBIL score when compared to credit score.
How to Increase and Improve the CIBIL Score/ Credit Score:
Check and Evaluate Your Credit Report
Regular checking on your credit reports will help you to see that your credit history has a positive or negative score. Moreover, the reports will give information about your payment behavior. So if you have any delayed payments, you can approach the bank, so that you can correct and prevent the complications. Furthermore, people can also make mistake in manual or computer software errors, so that make sure to check and evaluate your CIBIL or credit report regularly. Accuracy in the credit report will help to improve and increase the good credit score/ CIBIL score.
Clearing Dispute Inaccuracies
Usually, mistakes can happen on any side, that is lenders or even burrowers can also make the mistake in the credit report. If you disagree with any type of transaction or if you find any error in the data entries, then you can ask the bank or financial institution to take action on the particular disputes. Also, you can fill the form of dispute regulation form on the official website of the CIBIL. As per the rules, it is compulsory to take action within 30 days. Moreover, this will help to increase and improve the good credits/ CIBIL score.
EMI regular payments will help to increase and improve the CIBIL/ credit score. The late EMI payment will affect the score and also this will tends you to pay a penalty. So make reminders to pay EMI regularly, which will help you to handle things easily. Furthermore, you can also make available the option to automate bill payment because this will help in preventing the missing or delaying of the EMI payments.
Customizing Credit Cards
The utilizing of credit will have a significant impact on your credit score. When you can restrict the credit usage according to the allotted limit to your account, then it will help to improve and increase the CIBIL/ credit score. When the usage of credit is crossed over the limit, automatically will lower the credit/CIBIL score. So try to keep tracking your credit limit and also you can get guidance from your lenders and you can customize the credit limit based on the regular expenses. Also, if you need a credit card and that time you can apply and get the credit card. Unnecessary impressions and too much debt also can affect the credit/ CIBIL score.
Clearing Old Credit Cards/ Old Loans
When you are going to purchase any new credit card, then make sure you don’t have any old credit cards or uncleared loans. Dumping mank debts will affect your score. So always clear the previous debts and this will help to improve the credit score. So that you can get the approval of new short-term loans or long- term loans very quickly and easily.
Credit Utilization Ratio
Always try to keep the credit utilization limit up to 30 percent or lesser. Furthermore, try to not use your credit card for everything. This will help to increase and improve the credit score/ CIBIL score. The main reason behind this is that when you have a low balance, it will impact your credit score or CIBIL score.
Avoid too much Debt or Loans
Taking too many loans or debt at the same time, will tend to sometimes risk and be tougher to repay all debts at a fixed time. Moreover, this will create an impact on your credit report. So if you are manageable with two loans at a single time, then you can take, otherwise try to take one loan and repay that loan. Afterward, you can take other loans one by one.
Monitoring the Joint Accounts
If you are a part of any joint accounts, then make sure that all payments are paid and cleared at the correct time. It is very important to keep checking the guaranteed or co-signed or joined accounts regularly. If your joint account holder has not handled properly the account, your ability access to the credit will also be affected and this has a chance to get reduce in the CIBIL / credit score. So always be careful when you are in the joint accounts or even in the guarantor of the loans.
Avoid keeping trying to Credit Cards or Loan if it is getting rejected
When you got rejected for loans or credit cards many times, then try to avoid applying again and again. Moreover, this will get recorded in the credit report and this will affect your credit/CIBIL score. Even if you apply in the other banks, they will verify your credit report first and they will proceed accordingly to the report. So, this will make to reject again. Multiple applications within a short period, tend to decrease your creditworthiness. So take the proper guidance from the bank or fund institution for recovery from the rejection. You can wait till your score get high and then you can apply to the loans or credit card.
Zero percent Credit Card to Improve Cibil Score
Usually choosing a zero percent credit card offers the no-cost EMI for certain huge/large purchase items on various marketplaces online, where the interest amount is discounted from the price of the order. Moreover, this will help to reduce the chances of impact on your credit score. Also, it will be easier to repay and this will help in escape from the missed payment. One important thing is that you should ensure that the card does not include any type of hidden charges like processing, annual, transfer fees.
Contribution of Credit Mix to Improve the Score
It is very important to have an equal credit mix which includes secured loans (home loans, auto loans, etc) and unsecured loans (credit cards, personal loans, etc) and also having short-term- credit and long-term credit. So this healthy credit mix will help to increase and improve the good credit / CIBIL score. If you want to get any business loan, a good credit score will help to get it easily and quickly.
Using a longer EMI duration to pay off the debts in nominal amounts can help you sustain your CIBIL score, if not demerit it. Having a much larger credit limit also helps you improve the CIBIL score and simultaneously having a very low utilization rate. This will help to not only improve the good CIBIL score but also gives your flexibility and smart choices over your expenditures.
Increasing and improving the good credit score / CIBIL score cannot able to do in overnight. So first try to evaluate and sort out the problems from your credit report. Approach the bankers or financial institutions and take the proper consultation and implement according to their guidance. Monitor your credit report regularly and change the patterns of the spending payment and make sure to pay the debt at the right time. The proper consistency efforts with the patient will help to improve and increase the good credit / CIBIL score.
FAQs regarding Improving CIBIL / Credit Score
A good credit score or CIBIL score is a numerical representation of the creditworthiness of a loan. A higher score indicates a good reputation and responsible for the money, which has been credited in the past. In India, credit score contains 3 digit numbers ranges from 300 to 900, which will reflect your credit history.
There are four bureaus in India and they are CIBIL, Equifax, CRIF Highmark, and Experian. These are central bureaus licensed by the Reserve bank of India (RBI).
If you have a higher score, which is 700 or above, then it will be easier to get a loan. Moreover, it will be calculated based on the credit records which include total debt, credit history, the behavior of money repayment, etc.
Editor’s Note | How to Improve CIBIL Score
In this pandemic situation, many peoples lost their job and are suffering from the economic slowdown. People who are lost their job should spend their money wisely from their accounts during their online purchase. Mistakes will often result in problems in repaying the debt to the lenders. These issues in settling debts in proper time will tend to decrease the CIBIL / credit score. Reserve bank of India has announced many guidelines regarding the loan exposure during this covid time. So this can help to sort out your financial problems.
If you are struggling and not able to clear the higher debts or loans, then ask help from the bank to sort out this problem. There is a good chance to get bank offers like paying money at a lower interest rate. Try to cut down all the unnecessary expenses and clear the pending dues and try to save the money for any upcoming emergencies. Monitor your credit report regularly and plan wisely with your debt money. This will help to improve and increase the credit/ CIBIL score.