Whether you’re new to the world of loans or have found yourself applying for loans on a regular basis, the issue of credit/CIBIL score can be perplexing and even frightening. Having a strong cibil score, however, is critical if you want to reach major financial milestones in your life, such as purchasing your first home or upgrading that old automobile. After all, banks use your Credit score to determine whether you should be eligible for the best or worst loan rates, or even if they should give you money at all!
Knowing how to enhance your CIBIL score pays you big time. But before we go into some recommendations, let’s define a CIBIL score.
What is a CIBIL score, and how do you get one?
Simply put, your CIBIL score reflects your creditworthiness, or how dependable a borrower you are. Lenders are more willing to provide you a loan if your credit score is good.
Your CIBIL score is determined by the amount of money you’ve borrowed in the past. Your credit score is affected by factors such as your credit limit utilization rate, payment rate, length of payment history, whether your borrowing is secured, and the number of credit inquiries. Every time you take a loan or apply for a loan from a bank or NBFC, CIBIL receives the information and incorporates it into your score. That score is subsequently made available as a reference to all other lenders the next time you apply for a loan.
6 Effective Ways To Quickly Improve Your CIBIL Score
If you’re in desperate need of cash, you already know that a poor CIBIL score can make things exceedingly difficult. For example, in circumstances of debt payback or medical emergency where obtaining a loan is the only option, the final decision is based on how near your CIBIL score is to 900.
However, you may still be unsure about how to enhance your CIBIL score. Here are a few useful hints!
1. Be on time.
Always make an effort to make your loan and credit card payments on time. This will demonstrate that you are financially responsible and have a consistent flow of funds, reducing the risk for the person or bank loaning you the money!
2. Incorporate some variety
Maintain a healthy balance of secured and unsecured loans. Why? Because lenders prefer to see customers who have a track record of timely payments across many types of credit. This displays sound credit management while also assisting the lender in determining your credit risk.
3. Use Credit Cards With Caution
While your loan repayments will gradually reduce your primary loan amount, keep a close eye on your best credit cards. Limits are supposed to be followed, especially when they pertain to money. So don’t overuse your credit card; it won’t help you improve your credit score in any manner!
4. Assume the role of a responsible joint account holder.
If you share a bank account with someone else, you share responsibility for late payments. If the joint holder of your account fails to make payments on time, it will reflect poorly on you as well, lowering your credit score. Is there a lesson to be learned? Keep track of your co-signed, joined, and guaranteed accounts, as well as your payments, to avoid a decline in your credit score.
5. Don’t Go Overboard When Applying For New Credit
When you take out little loans, it shows the lender that you understand your repayment capabilities and are therefore unlikely to default. If you apply for too much credit, on the other hand, you’ll merely raise your debt, giving the impression that you’ve taken on more than you can handle.
6. Take out a little loan.
Ask the bank where you have a salary account if you are qualified for a loan of 50,000/- or less. Small loans are easier to repay on time and will quickly improve your credit score, which may seem paradoxical.