Creditworthiness is a standard criterion that measures how well you have been able to manage your credit in the recent past. Based on your creditworthiness, the lending bank/NBFC or various other financial institutions shall decide whether to approve your credit application or not. High creditworthiness is always beneficial in availing new credit products.
Good CIBIL score, being one of the key components of your CIBIL report, improves your negotiation power with the lenders and enhances the options to choose from a wide range of loan products and credit cards. CIBIL score displays your creditworthiness to the lenders and allows them to mark an impression of you as a responsible borrower or not. The better your creditworthiness is; the more you shall enjoy the credit related benefits. Even if you have a low credit score, it does not imply that your loan application shall always be rejected. Consumers with low or poor credit scores or no credit history can also build and improve their credit scores in a few months by dedicatedly following the suitable measures.
By now you should be well prepared to follow the below stated tips to improve your CIBIL score that shall automatically boost your creditworthiness. To know your CIBIL score, you can check and download your free credit score or credit report from each Credit Information Company (CIC) or Credit Bureau and receive monthly updates, with no impact on your credit score.
6 Tips to Enhance your Creditworthiness
Monitor Your CIBIL Report Regularly
Your creditworthiness depends on your CIBIL score and to make sure your credit score does not fall, you need to regularly monitor your CIBIL report to check for errors. Once you are able to find any minor or major error, you need to resolve it at the earliest by raising a dispute online with TransUnion CIBIL. Even a minor error, if it stays for long in your credit report can lead to a drastic fall in your CIBIL score.
Maintain good repayment history
Pay-off all your Loan EMIs and Credit Card Dues in time, as missed or delayed payments lead to steep fall in your credit score. Make sure to add reminders or set auto pay with your bank account to avoid any loan EMI or credit card dues. Your good payment behaviour makes you a responsible borrower in the eyes of lenders that helps you to avail funds at ease and at competitive interest rates.
Avail a variety of Credit Products – Maintain Healthy Credit Mix
Healthy balance between unsecured and secured loans should be maintained. Multiple unsecured loans may result in a dip in your credit score, as they do not require any collateral/security to be submitted with the bank/NBFC. Your portfolio must include a balanced mix of credit facilities, such as personal loans (collateral-free), secured loans, secured credit card (against Fixed Deposit), as well as short-term and long-term loans. Maintaining a proper mix of loans increases the chances of availing higher loan amounts.
Avoid Closing Your Old Accounts or Credit Cards
Do not close down your rarely used credit cards or bank accounts, as your older accounts reflect your past credit behaviour and long-term relationship with the bank. Debt, if repaid in the desired timeline increases your creditworthiness and makes a positive impact on your new loan application. You should also try to maintain your good accounts active, wherein you have maintained a decent repayment history for a long time.
Do Not Apply For Multiple New Credit Products
Applying for any fresh credit creates a hard inquiry on your CIBIL report. Similarly, multiple credit inquiries in a short duration will surely lower down your CIBIL score. It has been observed that new credit applications are mostly rejected if applied simultaneously, as lenders observe your credit hungry behaviour.
Check for Credit Card Limit Enhancements
The best way to increase your creditworthiness is to increase your total monthly credit limit. Either check for credit card limit enhancement with your bank or wait for the bank to offer a limit increase on your credit card. Higher credit limit will instantly lower down your credit utilization ratio resulting in improved credit score. You shall not want to be a high-risk borrower by over utilising the available credit limit. Always try to increase your credit limit, if in need of higher spending.
Conclusion:
Your creditworthiness depends on the nature of your past credit behaviour. Try maintaining a good CIBIL score to further enhance the chances of your loan approval. You shall not be surprised to know that CIBIL score does not change overnight, as it requires a few months to see the negative or positive effects. Any minor or major modifications or rectifications in your financial habits can make a significant difference in improving your credit score in the long run.
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