Your CIBIL score represents your financial standing and other factors related to your credit behaviour. While assessing your application, lenders check this score to understand your financial status, repayment behaviour and existing credit obligations.
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The information helps lenders assess whether you are a reliable borrower and the sanction you can get. With a good score, you can get numerous financial advantages. This includes quick loans, lower interest rates, and more.
On the other hand, a lower CIBIL score can make access to these opportunities challenging. Therefore, improving your score can help you get better credit. The ideal score for easy and cost-effective credit is 750 and above.
So, if your score is under 750, you need to take action to bring it up, especially if it goes lower than 650. Thankfully, there are numerous tips that you can try to boost your CIBIL score by 100 points, if not more, within a short time frame.
To know these tips on how to increase your CIBIL score, read on.
Lower Your Credit Utilisation Ratio
The credit utilisation ratio refers to the total credit you have utilised against the total limit you have. For example, if you have a limit of ₹1 Lakh and used ₹30,000, your credit utilisation ratio is 30%.
Having your credit utilisation ratio on the lower side is a great way to maintain your good CIBIL score. A low ratio implies you don’t overly rely on credit. In contrast, a high ratio suggests otherwise and negatively impacts your score.
You can monitor your credit use to lower your ratio and improve your CIBIL score. If you notice the ratio going up, try repaying some of your debt to bring it down. To boost your score, reduce your utilisation ratio and keep it under 30%.
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Repay On Time And With Discipline
You can significantly improve your CIBIL score by paying off your existing credit. As such, it is one of the ways to increase CIBIL score. Giving importance to repayment shows good financial discipline and assists you in building your creditworthiness.
You can start by paying off loans with higher interest rates, which can help you save on interest payments. Following this repayment strategy can assist you in paying your loans, showcasing your willingness and ability to repay.
You can also protect yourself from late payment fees and accumulated interest by repaying your credit. Thus, payment of your credit can help significantly improve your CIBIL score and save along the way for financial growth.
Borrow Only If Needed
While you focus on repayment, you also need to restrict your borrowings to improve your CIBIL score. If you are already paying off previous borrowings, new credit will add to your obligations and may even strain your finances.
This can result in missed installments or a higher debt-to-income ratio. Both of these can negatively impact your score as it implies a heavy reliance on credit, an inability to manage finances, and poor repayment discipline.
So, do not apply for new credit when looking to increase your score. Also, keep in mind that new applications will lead to a hard inquiry into your report, which will lower your score.
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Dispute Errors In The Credit Report
Your CIBIL score comes with a credit report containing information about your credit behaviour. The information on your credit report forms the base for your credit score. Sometimes, there may be mistakes that lead to a lower score.
For instance, you may find that your credit report does not reflect your recent interest payments, EMI payments and other transactions. In some cases, fraudulent transactions may get recorded in your credit report, negatively impacting your CIBIL score.
Thankfully, you can always dispute such errors and get them rectified. Timely action can help you avoid the detrimental effects of errors that bring down your CIBIL score. One of the easiest ways to boost your score, even by 100 points, is to fix such errors.
Depending on the error, you can easily increase your score significantly by getting it rectified.
Have A Good Credit Mix
A healthy credit mix signifies that you have an experience regarding different types of credit. It also shows that you have a strong financial standing and that you are capable of repaying different kinds of borrowings.
It is essential to note that you should have a positive track of repayments on all forms of credit. This is because your repayment history gets included in your credit report and has a significant impact on your CIBIL score.
So, if you’re looking to increase your score, check if you have too much unsecured credit. If you do, consider paying off and closing an account. This can definitely help increase your score.
Apply For Credit Sparingly
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If your application was recently rejected, you may be tempted to apply with another lender or financial institution. However, you should avoid doing so, as it can have a negative impact on your CIBIL score.
This is because when you apply for credit, lenders check your credit score, which registers a hard inquiry on your profile. This lowers your score, and applying frequently can add to it, further hurting your credit score.
If you already have some credit accounts, focus on closing those before applying for a new loan. This will establish a good repayment history and help improve your score.
Become An Authorised User
A quick method of improving your CIBIL score is becoming an authorised user on an account whose primary holder has a good credit score. This will allow you to piggyback on their credit score and build yours.
This option is especially great for those who are new to credit and wondering how to increase CIBIL score for better access to credit. However, remember to be responsible in your use. Your actions will also impact their credit score, and being irresponsible will lower their CIBIL score.
Now that you know how to increase your CIBIL score, follow these techniques to get a better hold of your finances. Remember, improving your CIBIL score is not something you can achieve overnight. It requires time and consistent efforts, like the tips mentioned above.
Even after you reach the desired CIBIL score, follow the above tips to maintain your score and be credit-ready.
