5 tips to improve your CIBIL Score

Wed, 11/09/2022 - 07:45

Author: JLL


Is your CIBIL score below 750? Do you want to improve it? Here is how to improve your credit score in India to get your loan application approved. The CIBIL score, or credit score in India, has always played a vital role during the home loan application process. A good CIBIL score gets your loan application approved quickly. However, if your CIBIL score is bad or you fail to meet the minimum credit score, your loan application gets rejected. So, here is how to increase your credit score if defaulter, just by following 5 simple tips that will ensure your CIBIL score improves quickly.

Also, Read - CIBIL Score – From importance to Implications

5 Tips to Improve Your CIBIL Score

Repayment of credits on time

Missing your credit dues can have a significant impact on your CIBIL score. These dues can land you in trouble during a home loan application as each default on your payment is reflected in the CIBIL report, which portrays you as an irresponsible and risky borrower to the bank. Therefore, you must set a reminder to repay your credits on time. In case you still default on your payment, check the auto-debit process with your bank to ensure that your EMIs are paid on time. In order to get easy home loan approval, you must have maintained a CIBIL score of 750 or above.

Curb your credit utilisation

It is advised to constantly maintain a low credit utilisation ratio as it shows that the borrower is handling his credit obligations responsibly. However, if the credit utilisation is on the higher side, it indicates that the expenses are more than the income generated which indirectly affects your CIBIL score. Overspending is an indicator that you have struggled managing your finances. Therefore, most of the credit bureaus advise keeping the credit utilisation ratio lower than 30% of the total credit available.

Track your credit reports

At times, there could be errors in your CIBIL score. However, it is your responsibility to check and get it rectified by the institution as soon as possible. Many institutions provide a free, one-time CIBIL check on their website, which can help you keep track of your CIBIL score. In addition, you should not only check the credit score but also check whether the information displayed on the report is correct. Any incorrect information can get you in trouble during an emergency trying to get a loan application approved. Furthermore, you should always keep in mind that even if your bank does a settlement for you to get your loan cleared, it will indirectly affect your CIBIL score. Therefore, it is advisable to keep a constant check on your CIBIL score to maintain a good and error-free CIBIL report.

Frequency of loan application matters

Yes, you read it right! The frequency of loan applications matters as each of your application processes requires a CIBIL report, and each inquiry from the bank on your credit report is recorded by CIBIL, which may cause the score to come down. This impacts you negatively in two ways – 1) too many applications portray credit-hungry behaviour 2) your portfolio is impacted negatively even if you can repay the loan amount. Therefore, you must have the patience to avoid getting your home loan application rejected.

Keep a healthy credit mix

Keeping a healthy credit mix is to create a credit history of borrowing both types of loans, i.e., secured loans and unsecured loans. Secured loans include home loans, car loans, mortgage loans, etc., while unsecured loans include personal loans, student loans, credit cards, etc. Keeping a healthy mix is important because banks trust borrowers who are committed to the repayment of both kinds of loans. This not only gains the banks’ trust but also improves CIBIL score which later helps you when applying for a home loan.

As long as you maintain a good credit score, no bank can reject your loan application. Hence, you are in an advantageous position to deal with any financial emergencies that may arise in the future. Here’s a bonus tip for you, with a good credit score, you can negotiate with your bank for a low rate of interest.