A good CIBIL score is essential when applying for any credit — a personal loan, a home loan, or a credit card. Lenders use this three-digit number between 300 and 900 to measure your credit standing.
CIBIL score is a major decision-making criterion for banks and NBFCs when you are planning to take a loan. The higher the score, the greater the chance of getting the loan and better interest rates.
Individuals should keep an eye on real-time tracking of credit behaviour to improve their credit profile. With the advent of fintech tools and credit monitoring apps such as CRED, OneScore, and Paytm, individuals can simultaneously monitor any quick changes in their credit score. These platforms alert users about due payments, sudden credit utilization hikes, or some adverse remarks on their credit report.
To improve your CIBIL score before applying for a loan, an individual should:
Check Your Credit Report Frequently.
Before considering improving your score, know exactly where you stand with it. Request a free CIBIL report from the official website and review it for:
- Errors or discrepancies
- Accounts or loans you might never have taken
- Payments delayed or missed
File a dispute on the inaccuracies immediately to ensure your score represents your financial behaviour.
Make Payments on Time
Timely payment is considered an important parameter for a CIBIL score, but it can sometimes mislead an applicant; late or missed payments, even for a day or two, pull a huge chunk down. Set reminders or automatic payments for all your EMIs and credit card payments so you never lose track of any due date.
Bring Down Your Credit Utilisation Ratio
Make sure to bring down credit utilisation. On the contrary, the higher the credit usage, the lower the credit score, as it shows an affinity towards credit. Usually, it is advised to keep your credit utilisation ratio below 30%.
Do Not Submit Multiple Loan or Credit Card Applications at Once!
Whenever a person applies for credit, the lenders perform a hard inquiry on their credit file. Several inquiries in a short time may decrease your CIBIL score and depict financial dilemmas.
Keep Old Accounts Open
A long credit history adds credibility. Closing a credit card with a good payment history would hamper the credit score by shortening the average credit age.
Co-Applicant or Guarantor
If you become a co-applicant or guarantor for someone’s loan, that person’s repayment behaviours will affect your credit score. Make sure the other party is financially responsible before you agree.
Improving your CIBIL score is a process that does not change overnight. Start early, keep tabs on your credit behaviour, and follow good financial practices to increase your chances of getting the loan approved on good terms.
Disclaimer:
The credit information provided in this blog is for educational purposes only. It should not be considered financial advice. Always consult a certified financial advisor before making financial decisions.
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