A 3-digit numerical expression with a range between 300 and 900 is the CIBIL score. Your CIBIL score is improved the closer it comes to 900. The best CIBIL score for obtaining a loan with favorable terms is 750. You must take action to raise your score if it falls short of the ideal.
So, how to increase CIBIL score? Create these behaviors listed below to raise your CIBIL score:
- Pay credit card debt promptly
Paying off outstanding credit card payments will improve your credit score. You might be able to avoid incurring late fees by developing the practice of only paying the minimum amount due when it appears on your credit card statement. This minimum payment is equal to about 5% of the billing total for that cycle. But because interest and taxes are later added to the bill in the subsequent cycle, this leads to a mountain of debt.
Paying your bills on time prevents interest from building up and gradually improves your credit score.
- Limit Credit Usage
Utilizing less than 30% of your credit card limit will help you keep your credit score from being lowered. On the other hand, not using your credit card at all could harm your credit score. It’s recommended to pay off your credit card debt in full upfront. It is advised to choose a greater credit limit, which can assist in quickly raising your credit score if you are using more than 30% of the available credit on your card. It’s also a good idea to restrict the number of loans you apply for. Your credit score might be impacted negatively by making many loan applications.
- New Credit Cards
When applying for credit cards, be cautious. Credit cards are helpful when applying for loans, despite the possibility that having numerous credit cards and making pricey expenditures are bad. Before applying for a credit card, it’s a good idea to see if you qualify, and you should also visit banks where your loan application has a better chance of being approved.
Make sure to keep a sufficient interval between applications to avoid giving lenders the impression that you are actively seeking financing. Applying for credit cards when you can pay them back will increase your credit score by earning points.
- Continue to check your credit report
In 2012, the Federal Trade Commission conducted research and discovered that about 20% of consumers’ credit reports included errors. A follow-up study conducted in 2015 revealed that clients who had reported an unsolved issue continued to believe the report contained an error. Check your credit report occasionally for errors and anomalies. By law, borrowers are entitled to one free credit report per year from credit bureaus.
Online marketplaces have also simplified credit history monitoring. The report can have errors including incorrect data, a delay in updating the report, or a delay in updating important components. Your credit score may suffer as a result of these mistakes. If there are any errors, they can be immediately reported and fixed.
- Choose a Range of Credit Options
Credit, when used responsibly, can be advantageous since those who have never had any credit tend to have lower CIBIL scores, which might make it more difficult for them to obtain loans. Therefore, it is advised to vary your loan portfolio by combining personal and secured loans, long-term loans, and short-term loans to establish your credit history.
When you decide to apply for a loan, these steps can assist increase your chances of receiving a larger loan and a lower interest rate.
- Boost credit card limits
An increase in your credit limit will instantly result in a decrease in your credit use ratio, which will boost your credit score.
After a certain point, the credit scoring models will label you as a high-risk borrower if you continue to spend your credit limit aggressively. As you go closer to (or exceed) your credit limit, your credit utilization ratio increases significantly, increasing your default risk. The risks don’t directly affect you, but your credit score is negatively impacted.
It is therefore preferable to raise your credit limit before making any further purchases. This gives you the chance to responsibly manage your credit and keep your credit use low, which raises or maintains your credit score.
- Keep previous debt on your report
Based on your previous credit behavior, which is represented in your credit score, the lender chooses whether to approve your loan application.
So keeping a record of your past good loan account in your credit report is a good idea for your credit score. Because it improves your creditworthiness and favorably impacts future loan applications, paying off a debt by the terms stipulated and within the authorized time frame improves your trustworthiness.
Another way to improve your credit score is to keep your good accounts with a solid repayment history active for as long as you can. The most common strategy used by businesses is this one. They keep their credit account open for as long as they can to boost their credit score.