How to Improve CIBIL Score? Practical Tips to Help You Get Started!

How to Improve CIBIL Score? Practical Tips to Help You Get Started!

Wondering how to improve CIBIL score? Your CIBIL score, also known as credit score, plays a critical role in determining whether or not you will get the approval on a loan or credit card application. TransUnion CIBIL Limited, the leading credit bureau of India, issues this rating. Your credit score is determined after a careful analysis of data related to your credit history. The credit bureau takes into account various factors such as the amount of debt, payment history, and credit utilization. The rating ranges between 300 and 900, with 900 being a “great” score and 300 being a “poor” credit score.

How to improve CIBIL score?

Have you recently run a CIBIL score check and found it to be lower than average? Having a poor credit score can pose a number of problems. Not only will you struggle to get instant loans and other financial products from traditional lenders, but you may also find it challenging to land your dream job. Thankfully, you can take steps toward improving your CIBIL score. Now, before you ask “how to improve CIBIL score quickly,” know that increasing credit rating overnight is not possible. It is a time-intensive task that takes proper planning and careful execution. Maintaining the following steps should help you get started:

Keep a tab on your credit report:

When trying to improve your CIBIL score, make sure to check your credit report regularly. A thorough analysis of this report will reveal what is causing your score to drop. It will also tell you what information is being added to your report to determine your credit score. Once you identify the problem areas, it would become easier to fix them.

Avoid applying for credit:

Every time you apply for a loan or credit card and it gets rejected, the information gets added to your credit report. Such rejections can hurt your credit score significantly. Traditional lenders also run hard credit checks on applicants, and that can damage your credit rating too. The best thing to do in such a situation is to wait for your score to improve a little to avoid facing rejection again.

Repay existing lines of credit on time:

Late payments, non-payments, and defaults are often the primary cause of low CIBIL score. When you take out a loan or use your credit card, make sure to have a repayment plan ready. Paying off your dues on time can help you improve your score significantly. If you are struggling to keep up with the EMIs, you can visit your bank and request help in restructuring your debt.

Do not settle credit cards or loans:

When dealing with a large debt, you may consider settling the existing lines of credit. Debt settlement allows you to close the credit lines by paying a lower sum than what you actually owe. Though banks may grant your request for a settlement, know that it will go into your credit report and leave a negative impression. It may even lower your credit score and make the bank unwilling to lend fresh credit in the future.

Think twice before making joint applications:

Joint applications can hurt your credit score even if you do not do anything to cause it. For example, if someone takes out a loan and makes you a co-signer, you will be just as responsible for the repayment of the loan as the borrower. So, if the borrower defaults on payment, their actions will end up damaging your credit score too.

A low credit score can be problematic, but you can still salvage the situation. If you have been wondering how to increase CIBIL score, now you have some actionable information.

How to improve CIBIL score after settlement?

Debt settlement can stay on your record for a long time and it can damage your score for at least 7 years. When you go for loan settlement, you risk losing credibility as a borrower. Lenders may see you as a “high-risk” application and refuse to lend you money. That is why it is crucial to want to improve your CIBIL score after a debt settlement. Here are some tips to help you do that:

  • If you have a few existing lines of credit, start by paying off the balance in those accounts.
  • Make sure you keep your credit card balance less than 30% of the limit.
  • After you settle your debts, make sure to keep up with timely payments on credit cards and existing loans such as a home loan or personal loan. Avoid late payments and defaults at all cost.

Proper financial management and healthy payment habits are key to earning good credit scores. Though you may find personal loans for low CIBIL scores, it is best if you try to improve your scores before borrowing.