CIBIL is a credit bureau in India that generates people’s credit reports based on their credit history. Ranging from 300 to 900, they assign you a CIBIL score that reflects your credit history and repayment habits. Several factors play a role in your CIBIL score calculation, including your debt amount, credit application, duration of credit history, payment history, credit mix, and others. Lending institutions check CIBIL score to determine your creditworthiness while screening your loan application before approving your loan or another financial product.
Many lenders classify applicants based on their score and offer them risk-based interest rates and other pricing solutions. The higher your score, the lower the interest rate lenders may provide you, and vice versa. Many lending institutions do not accept loan applications from applicants with a CIBIL score of less than 630. So, if your score is less than that, use these guaranteed tips to increase your score fast.
1. Pay Your Credit Card Bills in Full on Time
Paying off your credit card bills in full on time is a crucial step that can improve your score and save you from late payment charges. Many people have the habit of paying only the minimum due amount, which leads to the building up of taxes and interest amount you have to pay in the next cycle. So, avoid this by paying your bills on time.
2. Reduce Your Credit Utilisation Ratio
Keeping your credit utilisation ratio below 30% is a great way to improve your CIBIL score. However, that doesn’t mean that you should not use your credit card at all, as doing this can lead to no credit history and may negatively affect your score. The best advice would be to use 30% of your credit limit and pay its bill on time.
3. Be Careful While Applying for New Credit Cards
While a credit card can help increase your credit score, have several cards at a time and using most of them to make high-value purchases can be counter-productive. Using several credit cards can pose you as a credit-hungry borrower who largely depends on credit for expenses. Managing timely payments of several cards is also tricky, thereby increasing your chances of missing or delaying payments.
4. Check Your Credit Report Regularly
It is a fact that many customers have errors in their credit reports. Such errors may be mild to severe and may hold down your credit score due to no fault of yours. Therefore, it is crucial to check your credit report regularly and identify any errors and inconsistencies. CIBIL offers its customers one credit report a year for free. However, if you are planning to apply for a loan or suspect a low score due to a fault, you may request an extra copy at any time and check it for any errors.
If you find any errors in your report, dispute them with CIBIL immediately and have them fixed in your report. By doing this, you may notice an immediate increase in your credit score.
5. Diversify Your Credit Profile
If you obtain credit wisely and maintain regular payments, it can help improve your credit score. Lenders want to see if you can handle different forms of credit with responsibility. Therefore, it is crucial to diversify your credit profile by taking different types of credit, including secured, unsecured, short-term, and long-term loans. This simple trick can improve your chances of getting a higher loan amount with lower interest rates.
6. Request an Increase in Your Credit Limit
An increase in your credit limit will instantly reduce your credit utilisation ratio and improve your score. If you use up a significant percentage of your credit limit, you will pose yourself as a credit-hungry borrower with a high risk of default. Even if you have good intentions to pay off your loan on time, your credit score may reduce, and the lender may not give you a chance to apply for your loan application.
Hence, you must request an increase in your credit limit and keep your credit utilisation ratio below 30%.
7. Do Not Apply for Several Loans at a Time
Many people make the mistake of applying for several loans at a time with the hope of getting approval from at least one of them. But that is not the wisest thing you can do. Applying for multiple loans attracts several hard inquiries on your credit report, ultimately hurting your credit score. Too many hard inquiries also pose you as a credit-hungry borrower, which may only attract a loan rejection. So, compare the lenders first and finally apply for one loan that best suits your eligibility and requirements.
While trying to improve your score, you have to be persistent and patient. Your score won’t improve overnight. You will need to try consistently to repair your credit report and improve your score. Once you achieve a score of 630 or above, you may apply for a personal loan.