How to Increase CIBIL Score?

Understanding how a CIBIL score works and how to increase CIBIL score can open doors to better loan offers, lower interest rates, and more financial opportunities. Maintaining a good CIBIL score is important if you want to get your loan application approved easily. This blog offers suggestions on how to improve CIBIL ratings and strengthen your financial standing.

Here are the eight crucial tips you must consider to increase your CIBIL score:

• Timely Repayment of EMIs

Always pay your credit card bills and loan EMIs on time. Missing any payments can impact your CIBIL rating. You must remain diligent with loan EMIs specifically, as missed payments not only incur penalties but also lower your CIBIL scores. 

To stay on track, set reminders for due dates to ensure you never miss a payment. You can also set up automatic payments to have the loan amount deducted directly from your savings account each month.

• Maintain a Low Credit Utilisation Ratio

When discussing how to improve CIBIL score, knowing about credit limit utilisation is very important. A quick and effective way to boost your score is to avoid using your credit card to its maximum limit. Aim to use only 30% of your available credit each month. 

For example, if your credit limit is ₹1,00,000, try to keep your monthly spending to ₹30,000 or less. Exceeding this 30% threshold can give potential lenders the impression that you have impulsive spending habits, which can negatively affect your CIBIL scores.

• Use Your Credit Card Wisely

Credit cards can be great financial tools, but they are often misused. It is best to use your credit card only when necessary. Additionally, you must also pay off your credit card bills in full instead of just the minimum payment. Leaving a balance can result in high interest charges.

• Maintain a Credit Mix

It is wise to maintain a mix of credit types, including both unsecured options like credit cards and personal loans and secured loans such as auto or home loans. Lenders and credit bureaus favour applicants who have managed diverse credit accounts responsibly. While an optimal mix is not mandatory for loan approval, following these practices can help you better your CIBIL score over time.

• Avoid Multiple Credit Applications

Credit inquiries can be classified as soft or hard. Checking your own CIBIL score is a soft inquiry and does not affect your score. However, when lenders check your CIBIL report for a loan application, it is a hard inquiry.

An occasional hard inquiry has minimal impact, but multiple hard inquiries in a short period can signal that you are desperate for credit. Lenders may see this as a risk and can lead to application rejections. This ultimately lowers your CIBIL score. To avoid this, you must thoroughly research and compare different credit options before applying. 

• Review Your CIBIL Report for Any Errors

Sometimes, CIBIL may make mistakes when updating your records. These errors can lower your score. Therefore, regularly check your CIBIL report to spot any mistakes. If you find errors, you can correct them by submitting a CIBIL dispute resolution form online.

• Managing Co-signed and Guaranteed Loans

If you have co-signed or guaranteed a loan for someone else, it is crucial to stay vigilant about their repayment schedule. If the borrower fails to pay on time, your CIBIL score can be affected as well. 

Therefore, as a co-signer or guarantor, it is important to monitor the loan payments regularly. If there are any issues with timely repayments, communicate with the borrower promptly to resolve them and safeguard your creditworthiness.

Now that you know how to improve CIBIL rating and score, take proactive steps to enhance your financial profile. By following these above strategies diligently, you can boost your CIBIL score and unlock better financial opportunities.