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How to Increase CIBIL Score
A healthy credit score opens doors to numerous financial opportunities. Whether you're eyeing that dream home, a shiny new car, or simply seeking better credit card offers, a good CIBIL score is your golden key. It is used by banks, lenders, and Non-Banking Financial Companies (NBFCs) to determine if the borrower is trustworthy.
Understanding how to improve CIBIL score can be your ticket to a world of financial freedom. From timely bill payments to managing your credit utilization smartly, read on to know how to increase your CIBIL score and become a trustworthy borrower.
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What is a CIBIL Score?
A CIBIL score is a numerical representation of an individual's creditworthiness. It shows how responsible a person is as a borrower and serves as a crucial tool for lenders to assess the risk of extending credit.
Ranging typically from 300 to 900, the score is generated based on various factors including payment history, credit utilisation, length of credit history, types of credit used etc.
Maintaining a healthy score is important for getting financial opportunities and stability.
A higher CIBIL score can get you quick loan approvals and longer credit tenure. It is proof of your reliability and responsibility with money. Here are some different credit score ranges and their possible effect on your loans:
Now that you understand how your three-digit credit score can impact future loans, let’s see how to improve CIBIL scores immediately.
11 Ways to Increase CIBIL Score Immediately
Improving and repairing your CIBIL score is easy and smooth if you know the perfect way. Learn how to increase CIBIL score, and you will have an excellent score to flaunt in time.
1. Make Payments on Time
Payment delays or missed EMIs can negatively impact your credit score. You can simplify the process by setting a personal reminder or completing an Electronic National Automated Clearing House (eNACH) registration with the bank. eNACH automates payments with a one-time authentication to register your net banking or debit card details. Timely payments are the first way to cover yourself.
2. Maintain a 30% Credit Utilisation Ratio
All credit cards have a credit limit. The amount of credit in use divided by the total credit limit will give you a percentage called the Credit Utilisation Ratio (CUR). A CUR under 30% indicates you are doing well managing your credit. If you spend the entire credit limit, it can damage your credit score. If you are concerned about your CIBIL score, it is vital to do regular checks.
3. Check Your CIBIL Score Regularly
Regular CIBIL score checks can help you understand your financial health and check for inaccuracies or misinformation. Check the TransUnion CIBIL website for a free credit score check online. If there is any inaccurate data or a problem, raise a concern and get a CIBIL correction online. A CIBIL report correction can help you understand where you stand in your credit journey. Each credit inquiry can have a small impact on your credit score.
4. Avoid Multiple Credit Applications
How to increase CIBIL score comes with going for credit applications as per the need. Banks and financial institutions submit a credit enquiry when you apply for a loan or a new line of credit. Too many credit cards or loans in a short time adds a negative impact and can impact your CIBIL score. Apply for fresh credit only when you need it. You can also maintain or improve your score by being witty about the kind of credit you take.
5. Balance Your Credit Type
Secured and unsecured are the two types of loans available. Secured loans require the borrower to place something as collateral. The collateral is a seizable property for the lenders if the borrower defaults. Some secured loans are home loans or vehicle loans. They involve less risk for lenders.
Unsecured loans come with a sanction without collateral. It includes personal loans, education loans, or business loans. These collateral-free loans involve more risk for the lender. Credit cards are also considered unsecured credit.
It is vital to opt for a mix of secured and unsecured loans because payment delays for unsecured loans can negatively affect your credit score. Not only does the type of credit matter, but the duration matters!
6. Do Not Close Old Credit Accounts
How to increase CIBIL score comes with keeping an old unused credit account open. It might seem odd, but it can directly impact your CIBIL score. Credit-scoring models reward borrowers for having a long credit history. When you shut down a credit account, it nullifies your previous record with the lending institution and can negatively impact your CIBIL score.
Many people have a misconception that closing unused credit cards helps, but there is also a big misunderstanding about co-signing for loans. Read on to clear your doubts.
7. Be Careful With Co-signed Loans
Co-signing a loan means you are responsible for paying the total loan amount if the borrower cannot pay. It is not the same as serving as a character reference for someone. If the other person misses payments or defaults on the loan, it will impact you. It will lower your credit score.
How to increase CIBIL score needs responsible and careful co-signing. Always keep track of the loans you have co-signed or avoid co-signing for loans. If repayment is your concern, pick the people you co-sign for a loan right.
8. Never just Pay the Bare Minimum
When a borrower keeps paying the minimum amount due for a credit card, it leads to an unpaid balance. It can signal financial instability. The minimum amount due is usually 5% of the total outstanding amount. It also comes along with any unpaid balance from the previous billing cycle. Continuously paying the minimum can reduce your credit score and credit limit.
9. Avoid Paying Credit Card Bills in a Lump Sum
As you can see, repayments are vital but in an efficient manner. It is best not to pay the bare minimum but also not to pay a large sum at once. Learning how to increase CIBIL score comes with never paying a large sum at once. It can indicate financial instability. It can lower your credit score. It is best to pay back your loans and EMIs on time effectively and efficiently.
A good credit score can help you improve your chances of getting a loan or credit card. It can also aid you with other financial benefits. Understanding the tips to improve your credit score over time helps. It takes six months to a year to reflect in your credit report. If you wish for an improvement, you must start the process now. If you are looking for an education loan, the best interest rate or amount comes with a promising credit score.
10. Choosing a Longer Repayment Tenure
A longer repayment tenure might land you with more cash in hand and lower EMI amount every month. You may have to pay more interest in total but it will help you repay your dues with less difficulty every month and will also reduce your EMI/NMI ratio.Lenders consider your EMI to NMI ratio while analysing your loan application. A lower EMI/NMI ratio can work in your favour at the time of loan approval. If you assume you may face problems in repaying the loan that you are applying for, you can go ahead with a longer tenure.
11. Increasing your Credit Limit
Credit card providers offer credit limit enhancement options from time to time depending upon your credit card usage behaviour. If the provider gives you an option to increase your credit limit, you should opt for it as it also gives you the flexibility to use more credit when required. It does not mean that you are going to spend more money every month, rather you will have to be smart about managing your expenses.The simple trick is to have a lot more credit available and keep your utilisation low. Most experts suggest having a credit utilisation ratio less than 30% for having a positive impact on your credit score. However, even if you have a high credit utilisation ratio and you repay dues on time, the bureau may not penalise you for it.
A good credit score can help you improve your chances of getting a loan or credit card. It can also aid you with other financial benefits. Understanding the tips to improve your credit score over time helps, especially the ones that show how to increase CIBIL score without a credit card. It takes six months to a year to reflect in your credit report. If you wish for an improvement, you must start the process now. If you are looking for an education loan, the best interest rate or amount comes with a promising credit score.
Why is it Important to Improve Your CIBIL Score?
A high CIBIL score is an indicator of your high credit worthiness. It is important to have a high credit score and if you don't have one, try to improve it due to numerous reasons:
- A CIBIL score is crucial in determining the approval or denial of your credit application.
- A good credit score makes it easier to obtain a credit card or loan.
- A poor CIBIL score can be a significant obstacle for those urgently seeking credit.
- A high credit score can help secure loans at lower interest rates and credit cards with additional benefits.
- Most lenders reject credit applications from applicants with a poor credit score (600 or below).
- Even if approved, applicants with poor scores often face higher interest rates.
- To improve a poor CIBIL score and become creditworthy, you should diligently follow specific steps.
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Why Your CIBIL or Credit Score is Important?
With banks and other lending agencies opening up in every town and city of India, one might think that getting money will become easier, but this might not always be the case.
Given the kind of risk involved in lending, almost all financial organisations rely on certain criteria to gauge the repayment capacity of an individual or a business entity.
A credit score is perhaps the single biggest determinant when it comes to you availing of a loan, which makes it critical for us to maintain our credit scores.
As mentioned, CIBIL is the most popular credit rating bureau in India and adopted by most banks. Its score acts as the first impression of the applicant in front of the credit lenders.
Not only does a good score improve our chances of getting a loan/credit, but also helps us get a better interest rate from lenders.
Propelld's Customised Loans
Knowing how to increase CIBIL score is vital as banks and financial institutions assess CIBIL scores to approve or reject a loan.
However, Propelld provides student-friendly loans for education with no dependency on CIBIL score. It takes the student's academic performance and future earning potential into account for the loan.
The loan application process is 100% digital. It offers a quick loan sanction within 48 hours. These collateral-free student loans can help you fund the programme of your choice. All you have to do is pay your Propelld EMIs on time to maintain a healthy CIBIL score.
Here are some major benefits of Propelld education loan:
Benefits of Propelld Education Loan
A good credit score is important for a smooth financial journey. Take charge of your credit health and remove any financial barriers to the education you deserve with Propelld.
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