A good Cibil score can help you to get loans quicker, especially at times of urgency. Every lender uses different parameters before issuing any loan to the individuals. RBI has mandated for all the banks to check a Cibil score before assessing any loan or credit to the individuals. Thus, holding and maintaining a good Cibil score is very important. Let us focus on the different ways to keep a Cibil score good.
What is a Cibil score?
In simple words, a Cibil score determines the creditworthiness of any individual. It ranges between 300-900, 900 being the highest and 300 being the lowest. It is essential to maintain a Cibil score between 750- 900 to avail the best deals on interest rates for loans from banks and non-banking finance companies.
How can you increase or improve your credit score?
As you are now aware of the importance of holding a good Cibil score, let us discuss a few points to improve or increase your Cibil score.
- Need to check the credit report: You need to check your credit reports as it will reveal two critical things related to your Cibil score. The first thing it will let you know about loan or credit card where the default payment exits that led to the low Cibil score. The other thing it will reveal the information that is recorded in the credit report. These things help to bring into notice any negative information in the form of details or delays in payments. I any case of doubts, you can approach the bank and CIBIL for further help.
- Don’t repeatedly apply for the rejected credit: In case, if you apply for a credit card or loan and it gets rejected, do not rush for the same in the other banks as your first rejection will be recorded and other banks will consider it while assessing your loan or a credit card. Thus, be patient and look for other parameters to improve your credit score and then re-apply for any loan or a credit card.
- Don’t forward too many applications for credit or loans: Every time you apply for a loan or credit, the bank will enquire with CIBIL and it will be recorded in the report. The repeated enquiries may also affect your Cibil score negatively. It may disadvantage you in two ways, firstly, you display credit hungry behaviour, and secondly, it may pull down your score even you have the potential to pay off the loan timely.
- Clear your loans: Nothing more than delayed payments of loans or credits damages your credit score. Whenever, you use a credit card to get any loan, be sure you pay off the credit card bills and EMIs timely, set alarms and make it a priority to start becoming prompt with the payment. In case, if you are struggling with any due payments or EMIs, approach to your bank to help you restructure the debt to make it easier to pay.
- Borrow only when it is possible to return timely: Getting loans is not a big deal anymore and thus, you should not take any benefit of it in the wrong way. Always remember to borrow loans or credit when it is extremely urgent and also limit the borrowing amount to your needs. The higher the borrowed amounts means the higher will be the EMIs and more chances to default payments. While approaching for a loan be carefully selecting a loan tenure and EMI to make sure of easy payments of the borrowed amount.
- Do not borrow excess: Limit your borrowings as too many loans are likely to affect your credit score as it displays a credit hungry behaviour. Also, make sure that you should not come very close to your credit limits as it also depicts the same feel of credit hungry behaviour.
- Get a mix of secured and unsecured loans: You can apply for secured or unsecured loans from your credit cards. But it is advisable not to approach for unsecured loans plenty of time as the banks counts it as a negative and often, they decline your loans. You need to use your credit card for a mix of secured and unsecured loans.
- Look for joint applicants: In case, if you have any joint applicant, regularly keep watching on his/her credit transactions. If your joint applicant does not pay the loans or credit timely, it will adversely affect your credit score as it will reflect in your credit report as well.
It is a fact that a bad credit score will surely affect your future credit requirements but the situation can be handled and repaired with the above-listed measurements. You need to be patient as it takes a few months for the score to improve and increase.
By – Nikhil Shendurnikar (Director, Debt Counsellor)