Improving your CIBIL score involves a clear set of actionable steps that can significantly boost your creditworthiness. If you find yourself with a low credit score and are looking to apply for a new loan or credit card, it’s essential to take proactive measures to enhance your score. A better CIBIL score not only increases your chances of approval but can also lead to more favourable interest rates and terms on credit products. This guide will outline various strategies you can implement to enhance your credit score. By following these steps, you can improve your credit profile, which is crucial for securing a wide range of financial products.
What is a CIBIL Score?
The Credit Information Bureau (India) Limited, commonly known as CIBIL, is the most well-known of the four credit information companies approved by the Reserve Bank of India. The other three companies licensed by the RBI are Experian, Equifax, and Highmark. Among these, the CIBIL score is the most widely recognized credit score in India. CIBIL keeps credit records for 600 million individuals and 32 million businesses. It is a part of TransUnion, a large American company. As a result, credit scores in India are referred to as the CIBIL TransUnion score.
Verify Your Credit Report
It is always advisable that you periodically check your credit report because it reveals two important aspects of your credit score. First, the loan or credit card which has resulted in default or delayed payment will affect your score. The second is any recorded information with respect to your report. You may request the bank and CIBIL for correction if you find any errors.
Rectify Mistakes
Try to resolve the errors. Visit the official website of the credit bureaues. After checking your CIBIL report, mark out all the transactions with which you disagree or spot errors. Take action for a dispute within 30 days to get corrections done.
Don’t Apply too Many After a Rejection
When you submit an application for a loan or credit card and it gets rejected, the record of rejection surfaces on your credit report. If you apply with any other bank later, they will find your low score along with the history of the previous rejection, which may lead to another denial. Therefore, you should not apply until your score improves.
Make Limited Applications
Applying for too many loans and credit cards will harm your score. Each application sends a notification to the bank to check on your credit report, which then gets documented. Each inquiry will drop your score as you are displaying credit-greedy behaviour and undermining your ability to pay on time.
Never Settle Loans and Credit Cards
You can also settle a credit card or loan where you request closing the debt for less than what is owed. A bank may agree to this, but the settlement impacts your credit report adversely degrading your score and further credit opportunities.
Mix of Credit
There are two types of loans: secured and unsecured. If the major portion is in the form of unsecured loans, banks may consider the borrower as heavily reliant on unsecured credit and hesitate to approve new loans. A mix of both unsecured loans, which include personal loans, and secured loans, which may be car or home loans, is better. Remember that credit cards also belong to the category of unsecured credit.
Look for Other Credit Products
Careful usage of credit works to your advantage. A person having little or no credit history will normally have low CIBIL scores. Thus, it may be more difficult to qualify for loans. Improve your credit history and raise your CIBIL score by taking some secured loans and personal loans. Opt for both long- and short-term loans. On-time repayments of these loans will greatly increase your credit score.
Conclusion
Improving your CIBIL score is a systematic, step-by-step process that requires consistent attention to your financial habits. You should check your report, correct any errors, ensure your credit utilisation stays within limits, and make timely payments to enhance your score. Remember, rebuilding your credit score takes time, but the effort is worthwhile. With a CIBIL score app, you can easily monitor your progress and take proactive steps for improvement. Over time, as you rebuild your credit history, you can find better financial opportunities and secure the loans you need. Patience and diligence will lead you to a healthier credit profile and ensure future financial success.
