Smart Tips On How To Improve Your Cibil Credit Score?

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oi-Sunil

By Sunil Fernandes

Published: Saturday, January 2, 2016, 9:37 [IST]

Have you ever applied for a credit card or a home loan and had been politely declined the same? Chances are that one of the factors that could have led to the decline would be your poor Cibil Credit Score.

What Is A Cibil Score?

A Cibil credit score is assignment by Cibil based on various parameters. These metrics are not made public, though one thing is certain that you are guaranteed a good score, if you make timely payments and do not exceed your credit limits.

These scores could range between 300 and 900. If you are near about the 900 range, consider yourself highly creditworthy. On the other hand, if you are near 700 points, banks may not hesitate to lend you money. However, if you dip below 600 or so, getting a loan may be a big struggle for you.

Why do you get a poor Cibil Credit Score?

One reason to get this is because, you do not pay your installments on time. Any default on payment of interest and principal amount is almost certain to reduce your Cibil Credit Score.

If you pre-pay your home loan or any other loans early it may also lead to a slight deterioration in score.

Another reason for a very patchy score is the fact that you may have exceeded your credit limit. Also, if you have three credit cards and the limit of all three have been reached, it may not be good.

The above are some of the reasons for a poor Cibil score. Now, let us take this with individual examples.

1. If individual A has two credit cards with limit of Rs 70,000 and both have been reached, it would go to show the dependence on credit.

2. If your past track record suggests that you are a defaulter, wilful or otherwise it may not be good for your credit score.

3. Too many loans are also a hindrance. For example, if you have auto loans, home loans and credit card outstanding, it shows that you are living on credit.

4. If your loans have also been rejected in the past, it may tell on your score.

Here are some tips on how to improve your Cibil credit score

1. Do not apply for a loan without knowing your score

You can login into the Cibil website and pay a small amount and then apply for a loan. It is important to know your Cibil score before applying for a loan. Now, this would help in many ways. One is that it would not leave you dejected after running around for the loan, if it were to be declined. The second is that another rejection reduces your score. So, a way to improve your score is not applying for a loan without checking the score.

2. Important to have a credit history

If you are going to take a big ticket loan, it maybe helpful to create a credit history. Many individuals do not think it necessary, but, if you are regular with payments, then this could be good. You may take a credit card with a small credit limit and pay accordingly.

3. Utilizing credit limits with diligence

Utilize your credit cards smartly. For example, if you have three credit cards with a limit of Rs 70,000 each, then do not use the limit on two credits cards fully. Spread the limit in a more even manner on all the three cards. This might help to improve your credit score.

How is a credit score tracked?

Each time you spend and make payments or take a loan and make payment, the bank or the financial institution sends the report to the CIBIL. They then use their own metrics to arrive at your score. However, it is important to ensure that you keep checking your score, in case the financial institution has provided the wrong information.

How to improve your credit credit score solely depends on you. Follow the tip mentioned above and chances are even if you have had a bad start, it may be possible to redeem your score.

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