6 Proven Strategies to Improve Your CIBIL Score

Is your low CIBIL score keeping you from taking a loan or credit card? Or perhaps the loan you have applied to is charging you a hefty interest rate? If yes, then the only way to reduce the loan interest and ensure faster approvals is to improve your CIBIL score. Read this article to learn about the top six strategies to boost your credit score. But before that, let’s find out what an ideal credit score looks like.

Understanding CIBIL Score

The CIBIL score represents your creditworthiness. It is measured on a scale of 300 to 900. For more lenders, the ideal CIBIL score ranges between 750 and 900. A high credit score indicates excellent credit history and thus, increases the chances of loan and credit approvals faster than anticipated. A low score, on the other hand, implies poor credit management and often leads to loan rejections or high-interest rates. 

Top 6 Tips to Improve Your CIBIL Score

Listed below are a few simple strategies to enhance the CIBIL score –

1. Monitor Your Credit Report

Discrepancies or inaccuracies in personal information, payment history, loan amount etc. can lower the CIBIL score. Therefore, carefully review the credit report released annually by the Credit Information Bureau (India) Limited to spot and rectify such errors immediately.

2. Be Regular with Your Payments 

Pay your outstanding loan EMIs, credit card bills etc. on time to improve your CIBIL score. An easy way to do this is by setting reminders or automated payments to avoid delayed or default payments. 

3. Lower Your Credit Utilization Ratio

To maintain a good credit score, you should always keep your credit utilization ratio i.e. the amount of credit used compared to the total credit below 30%. So, if the total credit offered is INR 10 Lakhs, make sure you do not spend more than INR 3 Lakhs. Also, avoid maxing out your credit card or ask the lender for an increased limit or a balance transfer to merge debt.  

4. Get a Diversified Credit Portfolio

If you want to improve your CIBIL score, diversify your credit portfolio by including a healthy mix of both secured and unsecured loans or credit to demonstrate how capable you are of managing different types of credit.

5. Maintain Your Previous Credit Accounts

To enhance your credit score, avoid shutting down any of the old accounts, especially if you have positive payment records. If you close these credit accounts, it may affect the CIBIL score and the length of your credit history. 

6. Avoid Too Many Credit Inquiries

Applying for loans or credit cards multiple times within a short span can portray you as a high-risk borrower, thus negatively affecting the CIBIL score. To prevent this and improve your CIBIL score, apply for loans or credits only if needed.

Summary

Your credit score is one of the major parameters for loan eligibility.  Not only does a good credit score speed up the loan approval process but it also attracts low rates of interest and several other benefits. Improving the CIBIL score is a slow process. However, with the right approach and discipline, you can improve your CIBIL score to over 750 and overall creditworthiness.  Some of the pro tips include paying off existing dues, limiting credit utilization ratio, reviewing credit reports etc. Go through the above strategies and keep checking your credit score regularly.