The Reserve Bank of India has mandated that every credit card/loan applicant’s CIBIL score should be checked by the bank, at the time of evaluation. However, this is not at all a difficult task if you follow our guidelines on how to improve CIBIL score.
What is a CIBIL score?
The Credit Information Bureau of India Limited (CIBIL), is the oldest credit information company in India. The CIBIL score it assigns to you is just like a credit score. With a high CIBIL score, it is possible to get better offers on credit cards and better loan terms. But, how to improve CIBIL score?
Here are some effective methods to improve CIBIL score.
1. Maintain a good credit history
Maintaining a good credit history is essential for loan approval. Understand your credit report and identify areas you need to improve.
2. Use the oldest credit card
If you are thinking about closing your inactive credit card account, it could have an impact on your CIBIL score. Nothing can be better than a long-owned credit card with timely paid bills. A long-maintained healthy CIBIL score is one that lenders will always consider while approving a loan. Therefore, it is wise to keep a well-maintained account as long as you can.
3. Paying your EMIs and Bills on time
While making big purchases like buying a house or a car, ensure that you repay your EMIs and bills with utmost punctuality. Timely payment of bills is one of the most important things lenders consider during a loan approval.
4. Paying your dues in full
Through minimum monthly payments, you may think you are paying less right now. However, it is essential to note that you owe much more than what you are paying. Hence, it is a good idea to pay closer to the entire amount and avoid your CIBIL score from being affected.
5. Clear the credit card dues
It is always a good idea to improve your rating by clearing off all outstanding dues from your credit card. Clearing your credit card dues before the due date is a good practice. For this, you need to plan your credit card spending in such a way that your finances don’t slip out of your hands.
6. Eradicate the balances
Eradicating the balances means only spending as much as you can repay on time. Pay off all unpaid dues as soon as possible. Heavy dues on your credit card could drag your score down. However, paying it off on time will positively reflect on your credit score.
7. Get a mixed bag of credit
Avoid taking too many unsecured loans (credit cards, personal loans, etc.). Have a healthy mix of secured (home loan, car loan, etc.) and unsecured loans both.
8. Check for inaccuracies and errors
You might think that your credit record is good. However, even a minor reporting error could pull you back from getting your loan approved. Always check your credit report for errors and inaccuracies. Any error in your credit report should be appealed on the CIBIL website. You just have to submit a CIBIL Dispute Resolution Form online.
9. Do not use your entire credit
Avoid using the entire credit limit of your credit card. It is good to limit your usage to 50% of your credit limit. This will improve your credit score. Using more than 50% of your credit limit is considered as a sign of financial indiscipline, which could hurt your score.
10. Improve rating through Peer-to-Peer Lending Platform
Improving rating through Peer-to-Peer Platform could be regarded as the most effective way of improving your CIBIL score. These platforms allow people to register on the lending platform even when you have a poor CIBIL score. It is always easy to get a small loan with a short-term repayment period through this platform. There are no charges on prepayment and its timely repayment will improve your CIBIL score.
In terms of granting loans, there are a number of factors to take into consideration about CIBIL. Before granting a loan you should know what a good CIBIL score is. Improving your CIBIL score is not difficult if you are cautious and apply the aforementioned tips.