The most important metric that financial institutions take a look at before granting you loans and other credit facilities is your CIBIL score, which is a kind of credit score calculated by the TransUnion CIBIL. Ideally, your credit score should be above 700 to be considered good. Anything less than that and you might find it very difficult to avail the credit you need.
If you find that your credit score is below 700, don’t worry. There are many ways through which you can improve it. To understand how to improve your CIBIL score, you need to first know the factors that affect your score. Let’s check them out.
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Timely Repayment of Obligations
The single biggest way to make a positive impact on your CIBIL score is by making timely loan repayments. Each time you miss a loan EMI, your credit score gets lower. Therefore, it is important to ensure that you don’t miss out on paying even a single loan payment. When you continue to service your loan consistently and on or before the due date, your credit score gets a boost.
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Errors in Reporting
You receive a credit report each time you do a free CIBIL score check. Sometimes, your credit report may contain certain errors or mistakes, which can end up having a negative effect on your credit score. That’s why it is important to always read through your credit report thoroughly and report any errors or mistakes that it may contain as soon as possible to the relevant authorities. This way, timely action can be taken to restore your score to the correct value.
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Credit Utilisation Ratio (CUR)
The Credit Utilisation Ratio is a metric that’s employed to determine how much of your total credit you’ve used up. For instance, if you have a total credit limit of Rs. 10 lakhs and you use up to Rs. 3 lakhs, your CUR would come up to 30%. Now, the lower your Credit Utilisation Ratio is, the better your credit score is likely to be. Therefore, you can essentially boost your CIBIL score by lowering your CUR to 30% or less.
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Fewer Credit Applications
Each time you apply for a credit facility, lenders do something called a hard inquiry, where they retrieve your credit report to take a look at your creditworthiness. These hard inquiries affect your credit score and can bring it down. So, if you apply for too many credit facilities in a short span of time, the hard inquiries add up and ultimately bring down your credit score significantly. Want to learn how to improve your CIBIL score in this case? Ensure that your credit score doesn’t take a huge hit by spacing out your credit applications.
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Clearing Debt
Another great way to improve your credit score significantly is by clearing your outstanding debt obligations. For instance, if you’re in possession of any lump sum amount, you can use it to clear off high-interest and unsecured loans. This would reduce your CUR drastically, thereby giving a huge positive boost to your CIBIL score.
Conclusion
With this you must now be aware of how to improve your CIBIL score. If you’re not sure of what your credit score is, you can do a quick CIBIL score check for free at Bajaj MARKETS.