CIBIL Score is an important number that affects your loan eligibility status. Anytime you need a loan and apply for it at a financial institution, the lending body first checks on your CIBIL Score, and if the number is not ideal, then the application is rejected outright.
The lender only proceeds further with the application if your CIBIL is good enough. Then, it looks into other factors to decide on your creditworthiness and, based on it, makes the vital decision to approve or reject the loan application.
Even after agreeing on a loan approval, the CIBIL score plays a crucial part in deciding the applicable interest rate. If your score is high, you will benefit from a loan with a low-interest rate and vice versa. Hence, CIBIL Score is like your financial report card that gives the lender the initial indication of your fiscal history and establishes your credibility as an eligible borrower.
The CIBIL Score is essentially a three digits number that summarizes a credit history by acquiring data from the CIBIL report’s Accounts and Enquiries. It lies in the range of 300 and 900.
A score beyond 750 is regarded as a healthy CIBIL Score and increases the prospect of loan application approval. If your score is poor and you are looking forward to applying for a loan, you must check out our expert’s five guaranteed ways to improve your CIBIL Score fast.
1. Pay on time
The first step to keep your CIBIL score healthy is to pay on time. Not all the bills are reported to the credit bureaus. Payment history across loan types and credit institutions are what makes your CIBIL score. It is surprising that even an insignificant amount of library fine ignored for a long-term duration could find a space in your CIBIL report and negatively affect the score. Any missed bill or EMI can make its way to your credit report and bring down your overall grade. So, make it a point to pay off all the card bills or EMIs and give a healthy boost to your fiscal report.
To conclude, while it is good to focus on credit card bills and pay the various other loans like home loan or personal loan in the scheduled period. You can take the help of available tools and resources to automatically pay your bills from your bank account or set yourself a reminder for timely payments. If currently, you are late on a few payments, then take immediate corrective actions and pay all your pending dues. Typically, missed or late payments are recorded for a certain period of time but the good news is, they start losing impact with time.
2. Maintain credit card utilization
While spending from a credit card may seem lucrative, you must practice restrain and use the card in a prudent manner. A good credit card balance concerning the available credit limit enhances the credit score. So, try to have cumulative credit card balances within 30% of the cumulative credit limits.
It is dangerous to go overboard and spend more than 30% of the credit limit even though you very well know that you will make the total payment when the bill arrives. In general, the card-issuing agencies report the closing balance to the CIBIL authority, and it shows up in the report. So, keep a check on all your buys and stop making any further purchases once you hit 30 percent of the monthly credit limit. Maintaining credit card utilization would help you to speedily enhance your credit score.
3. Credit mix of unsecured and secured loan
Today we need different types of loans to progress towards our different personal and professional goals. We may need a home loan to engage in permanency and an education loan to further a career. At the same time, credit cards make our lives easier by allowing us to spend on purchases when we don’t have the money and pay all back when we get the monthly salary.
So, while our lives are dependent on credit cards and loans, it is a good practice to have a credit mix of unsecured and secured loans. Credit cards and personal loans are some of the top examples of unsecured loans, whereas auto loans and home loans come in the secured loan category. Hence, taking the right step and having a healthy mix of both types of loans greatly increases the CIBIL Score. It must be remembered that a greater amount of unsecured loans shows negatively in your financial profile.
4. Old is gold (Keep old debts /cards)
A credit card regularly reports your financial conduct to the credit bureaus. So, if you close a card, then the monthly reporting would stop and, in about ten years, the credit bureau would delete the entire credit card history from the credit report. It would decrease the age of your credit history. It would cause a decrease in the credit score.
Another disadvantage of credit card closing is that it will bring down your eligibility for available credit. So, it is best to treat the records of all old debts and cards and treat them like gold. It would elongate your credit history and make you eligible for bigger loans. Keeping old cards and debts is another crucial way to augment your CIBIL Score. You can check all your loans/cards being reported by logging into the CIBIL website. CIBIL offers free credit score checking.
5. Monitor joint accounts
While joint accounts are good and provide you greater monetary access with enhanced eligibility for loans at lower interest rates, a negative impact on the partner’s CIBIL Score would pass down the negativity to your report and decrease your overall loan credibility. Moreover, in joint accounts, guaranteed, or co-signed accounts, any missed payment from your partner makes you an equal culprit.
Negligence on the part of your joint partner may adversely impact your eligibility to acquire a loan when the need arises. So, monitoring the joint accounts and instantly paying back for your partner’s missed payment shows positively in your CIBIL Score.
Bonus advice: Keep monitoring your credit score
Now you might do all the right things to maintain a healthy credit score, and yet the report may not be up to your expectation. Here the problem is not yours but of the credit bureau or any other external agencies. Your CIBIL report may experience certain report discrepancies to CIBIL, which would adversely impact the credit score, which of course is non of your fault.
You could also be a victim of credit card fraud or identity theft that can leave your credit score in shambles. So, make a point of checking credit reports regularly and identifying the discrepancies to have a healthy good credit score.