Updated on 04 Jan 2021.
A good CIBIL score depicts your creditworthiness means you are good at repaying your loans or credits. With a high credit score, banks trust you and you can get easy approval of credit cards and best offers on loans.
Banks don’t approve loans easily to a person with a low CIBIL score.
Banks consider CIBIL score below 750 as a low score.
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10 ways on How to improve your CIBIL score
Let’s go through all the methods to improve your CIBIL score. Your CIBIl score won’t improve overnight despite using these methods. You will see the results in a couple of months because the CIBIL score takes time to get improved.
#1. Pay your credit card bills on time
If you are not paying your credit card bills on time that will result in a decreased credit score. Because you are not able to repay your borrowed money.
For example, Your credit card bill is Rs. 50,0000 and the interest charges are 3.2% per month and the due date is 31 Jan 2021. This means you have borrowed Rs. 50,000 from your bank that you have to pay by 31st January.
If you don’t pay Rs. 50,000 by 31 January, you will have to pay interest on the outstanding amount and if this trend goes on for a couple of months, your debt will increase due to interest charges, and this increase in debt will decrease your CIBIL score.
So try taking a personal loan or borrow from family and friends but clear your credit card outstanding immediately.
#2. Keep some credit limit balance
Don’t consume all of your credit limits available on credit cards. Try to restrict it to 70% of your limit. Utilizing full credit limit adversely affect credit score.
A better alternative is either you can ask your bank to increase the credit limit or you can keep another credit card to balance the expenses. I would advise spending only to the limit that you can repay easily within the due date.
#3. Keep your oldest card with you
If you have a credit card 5-6 years old and then hold on to that credit card maintains a track record of your good repayments.
A credit card that you are using for many years is proof of your old credits and repayment histories over a long period.
This will give a boost to your credit score.
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#4. Get a secured card
A Credit card approved against Fixed deposits is called a secured card. Because your fixed deposit will remain as security to the bank.
You can apply for a credit card against a fixed deposit if you are a student, housewife or if you want to establish your credit history.
Banks don’t mind giving a credit card against a fixed deposit. You will get 80% of fixed deposit amount as a credit limit.
You can improve your credit score by using the credit card and repaying in time within 6 months.
#5. Go for a loan of longer-term
Taking short term loans at regular intervals and repaying them does not enhance your credit limit. Rather go for a longer tenure and make payments on time. Timely payments for a longer period will boost your credit score.
#6. Avoid multiple loan applications
If your application gets rejected due to whatever the reason. Don’t rush to another application or another banker for the loan immediately.
Every time you apply for a loan, your banks check your CIBIL score. Frequent requests to CIBIL for credit score leaves a negative impact on the credit score.
The best way is to wait for a minimum of 6 months to apply fresh for a loan again.
#7: Avoid being a loan guarantor
Banks consider loan guarantors as same as the borrower. Before being a loan guarantor, keep in mind that if your friend (who is taking the loan) defaults on the repayment, you will be held liable and your score will go down.
#8. Raise a complaint to CIBIL report errors
If you notice any errors in your CIBIL report about loan closures, repayments made or any other errors, you can raise a dispute with the concerned bank or the lender immediately.
You can follow up with all the proofs to the bank’s grievance mechanism or you can directly contact CIBIL authorities for the inaccuracies.
#9. Monitor your joint accounts regularly
If you have a joint account for your loan or an addon credit card you have given to your family members, monitor those accounts on a regular basis.
If your co-applicant is also paying EMIs of loan, make sure that your co-applicant is paying loan EMIs on time.
#10. Maintain a mix of credit
You can improve your CIBIL score by availing secured as well as unsecured credits. Secured credits are like home loans and unsecured credits are like personal loans, credit cards.
Timely repayments to both secured and unsecured credit boost your credit score.
Increasing or improving your bad CIBIL score is a slow process that takes about 6-10 months to start reflecting in your CIBIL report. But a good credit score empowers you to bargain for lower interest rates on loans and you can also get better deals on credti cards.
You can check your CIBIL report free of cost every year. Check your CIBIL score and try to improve using above methods.
Let me know your thoughts or questions in comments.