6 Smart Tips To Boost Your CIBIL Score
Don't let a low credit score get in the way of your financial dreams. Keep a track of your CIBIL Score and see how you can improve it with these tips.
Money makes the world go round, especially in today's world where access to credit is essential to managing your personal finances. No matter if you're saving up for a dream vacation, the down payment on your perfect home, or planning to launch a business, having good credit can open up doors of opportunity. How can you ensure that you have good credit? That's where your CIBIL Score comes in.
Your CIBIL Score is a three-digit number between 300 and 900 that reflects your credit history and tells lenders how likely you are to repay your debts. Essentially, it's like a report card for how financially responsible you are, and lenders use it to decide whether or not to approve your credit applications. A score of 700 or higher is considered ideal: not only increasing your chances of credit approval, but also ensuring you get better interest rates and terms.
Whether you're a seasoned credit user, or just starting out, here are some smart tips you can use to improve your CIBIL Score and achieve your financial goals:
Smart Tip #1: Pay your dues on time
Life can get busy, and it can be easy to forget to pay a bill on time. But were you aware that even one missed payment can impact your credit score for up to seven years? This can hamper your future eligibility, too.
If you've missed a payment or have an overdue credit card bill, don't worry! Start by clearing your outstanding debt, and then commit to paying all your bills on time and in full going forward. While challenging at first, with a little planning, you can do it! Set reminders, automate payments, and monitor your accounts regularly to avoid missing any due dates. By staying up-to-date with your payments, you'll not only avoid late fees and penalties, but also demonstrate to lenders that you're a responsible borrower.
Smart Tip #2: Use credit wisely
Have you ever been to a potluck and seen someone pile their plate high with food, leaving nothing for others? Using credit can be a lot like eating at a potluck. If you take more than a fair share, you risk looking greedy and out of control. The same goes for credit utilisation. This is the percentage of your available credit that you're currently using; and if it's high, it can signal to lenders that you're a risky borrower who's heavily dependent on credit.
To keep your CIBIL Score healthy, aim to use credit wisely by keeping your credit utilisation ratio below 30%. So, if your credit limit is Rs. 50,000, you should aim to spend no more than Rs. 15,000.
One way to do this is by spreading your payments across multiple credit cards (if you have them) or by asking your lender for a higher credit limit. By using credit responsibly, you'll improve your CIBIL Score and prove to lenders that you're in control of your finances, increasing your chances of being approved for credit in the future.
Smart Tip #3: Maintain a healthy credit mix
Just like you need a balanced diet to stay healthy, you need a healthy mix of credit to keep your credit score in top shape. This means having a mix of different types of loans, such as credit cards, personal loans, and secured loans like auto or home loans. It's an easy way to show lenders that you're a well-rounded borrower who knows how to manage different types of debt responsibly. So, if you want to boost your CIBIL Score, make sure you have a healthy credit mix.
Smart Tip #4: Avoid taking multiple loans at once
It may seem like a good idea to apply for several loans or credit cards to increase your chances of approval. But it's not. Applying for multiple loans or credit cards within a short time can raise a red flag for lenders and hurt your CIBIL Score. Every time you apply for credit, it triggers a 'hard enquiry' which stays on your report for two years. This gives the impression that you're always seeking credit and raises doubts about your ability to repay them, making you a risky borrower for potential lenders.
To avoid this, only apply for credit when you need it, and after you have paid off your previous debts successfully. This shows lenders that you're a responsible borrower who only takes on debt when needed, and it can help boost your credit score in the long run.
Smart Tip #5: Be patient in building a good credit history
When it comes to building a good credit history and maintaining a high CIBIL Score, slow and steady wins the race. It's a lot like planting a seed and watching it grow – it takes time, patience, and care. Efforts to boost your score can take almost a year to reflect on your report, so don’t despair!
Remember, debt isn't necessarily a bad thing, as long as you use it prudently. For instance, avoid closing old credit accounts, even if you aren't using them regularly. Keeping them open lengthens your credit history, which is a good thing in the eyes of lenders. Closing them, on the other hand, can hurt your score because it shortens your credit history, lowers your credit limit, and increases your credit utilisation ratio. So, be patient and let your credit history grow and mature over time. With patience and the right credit management strategies, you'll be on your way to a higher CIBIL Score in no time!
Smart Tip #6: Review your credit report regularly
Checking your credit report regularly is an essential step in managing your credit health. It's like a routine car engine check to ensure it's running smoothly. You never know when a mistake or an error could creep up on your credit report, and that could hurt your credit score. By reviewing your report, you can catch these errors early and get them fixed. Also, it's a good idea to check your report before you apply for any new credit. This way, you can ensure that you meet the necessary eligibility criteria and increase the chances of approval.
These six smart tips should keep you on the right track to boost your CIBIL Score. So, start implementing them today and watch your score improve steadily. And if you're not sure where to begin, Bajaj Finserv Credit Pass is the perfect tool to get you started. It offers you unlimited credit score checks and real-time updates on your credit health. With Credit Pass, get a complete overview of all your credit accounts so you can monitor them and learn about the factors that affect your CIBIL Score. Also, get access to available pre-approved offers on credit products that ensure your borrowing experience is a hassle-free one.
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