The CIBIL score, which ranges from 300 – 900, is a critical parameter for credit facilities. In fact, financial institutions mandatorily check an applicant’s score when assessing their eligibility for credit, especially unsecured ones, like a personal loan.
Therefore, possessing a healthy score is quintessential in credit matters, and helps in faster approval. Conversely, possessing a poor score can adversely impact eligibility and might lead to delayed approval or even rejection of an application.
You might also note that CIBIL is just one of the four credit bureaus in India. However, most financial institutions consider the score provided by CIBIL as the standard reference point. Hence, it is crucial to know how to improve CIBIL score to be in the good books of financial institutions.
But before delving into that, it might benefit you to understand the factors that influence your credit score broadly.
- Repayment history – As the name suggests, it refers to an individual’s history of repayment of institutionalised credit they had or have availed. It denotes a borrower’s trustworthiness regarding credit facilities.
- Credit mix – It underlines the mix of secured and unsecured credit facilities you have or had availed.
- Credit utilisation ratio – It illustrates the percentage of the total credit limit that you utilise in a specific month.
- Enquiries – Financial institutions enquire about you when you apply for any credit facility with them. CIBIL also factors in that component in computing the CIBIL score.
The ways how to improve CIBIL score, then, are based on influencing one or other aforesaid factors.
Methods to improve credit score
These methods are discussed in the following points:
Repay dues in time
As mentioned earlier, your repayment history plays a pivotal role in the determination of your credit score. Therefore, it is critical that you routinely pay your dues from institutionalised sources, like personal loan EMIs, credit card bills, etc.
For that purpose, you can set a reminder(s) to avoid missing out on repayment dates and thus, effectively maintaining a stable repayment history. It is one of the top things you can do to improve your personal credit score. Alternatively, you can also choose to activate auto-debit for repayments to alleviate the hassle of remembering.
Maintain a low credit utilisation ratio
Your credit utilisation ratio reflects your dependency on credit facilities. A high utilisation ratio denotes that you are overly dependent on credit, and financial institutions do not take to that favourably. Consequently, it leads to a lower CIBIL score.
Therefore, when answering how to improve CIBIL score quickly, financial experts advise cardholders to maintain a credit utilisation ratio below 30%.
Such a low ratio indicates that you are less dependent on credit to maintain your lifestyle, and that reflects on the score positively. This factorisation is one of the reasons why CIBIL score is important for personal lending.
Check credit report routinely
You might want to develop a habit of checking your credit report routinely. That’s because, in some cases, CIBIL might make errors in recording or updating details pertinent to your report, which might affect your score.
In case you notice discrepancies in such a report, you should register the same with CIBIL and ask them to update those erroneous details. You need not know how to update CIBIL score if you have already intimated the company.
Bring variety in your borrowing mix
Another effective method of improving the CIBIL score is a healthy credit mix. Therefore, you might want to maintain a mix of both secured and unsecured credit facilities.
Maintain older credit cards
When you maintain older credit cards, it provides for substantial credit history. That, in turn, reflects on your score well. However, ensure that you can afford to maintain those cards when considering how to improve CIBIL score.
A healthy credit score is a gateway to credit facilities, like a personal loan. A score above 750 not only improves eligibility but also makes way for better terms on loans from NBFCs like Bajaj Finserv.
The company also provides pre-approved offers on loans to minimise the time and hassle involved in receiving approval. These offers apply to a wide range of financial products such as personal loans, business loans, etc. You can check your pre-approved offer by providing your name and mobile number.
Nevertheless, since a loan without CIBIL check is uncommon, it shall benefit you to follow steps and habits, like the ones mentioned above, to ensure easy loan availability. However, you can avail a personal loan when you have a poor CIBIL score by providing documents that substantiate your repayment capability.