Borrowers often ask: what is the best CIBIL score for a home loan? The answer is anything above 750. If the borrower's credit score is below 750, the next question they inevitably ask is: is it possible to improve their CIBIL score immediately? The answer is no. Improving one's credit score takes time. If your current CIBIL score is below 750 and you want it to shoot up, be prepared to practice financial discipline for at least 6 months. Now that we have this out of the way, let us discuss some important tips on how to improve your current CIBIL score.
Always Clear Bills and EMIs on Time
If you want to maintain a solid credit history, make it a point to clear credit card payments and EMIs on time. Keeping a good credit score is important and borrowers should improve cibil score to get their loan sanction. Credit history makes up 35% of your credit score and therefore, missed EMI payments affect a person's credit score more than they think. While a single missed EMI payment won't push your CIBIL score down too much, too many missed payments will certainly have a strong impact on your credit score. Remember to borrow what you can easily repay so that repayment does not become burdensome for you. Further, set up reminders so that you never miss an EMI due date.
Credit Utilization Ratio
The credit utilization ratio refers to the percentage of credit used to credit available. A high credit utilization ratio signifies an irresponsible borrower. Therefore, borrowers are advised to maintain their credit utilization ratio under 30%. Those who want to improve CIBIL score must try their best to clear the entire credit card bill and not just pay the minimum due as this also brings down one's credit utilization ratio.
Do Not Close Old Accounts
The length of your credit history also has an impact on your credit score. The longer your credit history, the better will be your credit score. It is for this reason that borrowers should never close old loan accounts. When you close a loan account, your entire credit history gets deleted. This will hurt your credit rating.
Limit Loan and Credit Card Applications
Every time you apply for a loan or credit card, a lender enquires about your CIBIL score. This enquiry that a lender makes gets registered as a hard enquiry. Too many hard enquiries bring down a borrower's CIBIL score. Thus, if you are trying to improve your CIBIL score, make sure to limit Loan applications. Apply for credit only when you need it.
Maintain a Healthy Credit Mix
Lastly, when you maintain a healthy mix of credit, i.e. you have both secured and unsecured loans, you can better convince your lender of your ability to handle different forms of credit. Having a mix of credit also increases one's CIBIL score.
Most borrowers do not understand the importance of having a good CIBIL score. A good credit score helps borrowers in many ways. Therefore, borrowers must check their credit scores from time to time and if they find that their free CIBIL check is not delivering results that make them look creditworthy, they must take action immediately.
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