5 Simple Tips To Improve Your CIBIL Score

If you are looking to apply for a loan or credit card, your credit score is one of the most critical factors that lenders consider before approving your application. Your credit score reflects your creditworthiness and financial history. The higher your score, the more likely you are to be approved for a loan or credit card with better terms and interest rates.

In India, the Credit Information Bureau (India) Limited (CIBIL) is the leading credit information company that provides credit scores to individuals.

Before we look at tips to improve your credit score, let us first understand what is in your CIBIL Score and why it is important.

The importance of your credit score

Your CIBIL Score is like a report card of your credit history. It ranges from 300-900. TransUnion CIBIL calculates it based on your credit usage and loan repayment. A good score boosts your chances of loan approval and gets you better rates and terms, saving you a lot of money in the long run. An ideal CIBIL Score is 750 or higher, indicating that you are a financial superstar who is responsible with credit.

It is possible that a single missed EMI or credit card payment may impact your score. Here are five simple tips to help you take charge of your credit score and improve it:

Tip 1: Pay your bills on time

One of the most critical factors that determine your credit score is your payment history. Overdue payments or defaults can significantly impact your score. Hence, it is essential to pay your bills, loans, and credit card dues on time to maintain a healthy credit score. Make sure to set reminders or automate your payments to avoid missing any payments.

Tip 2: Keep your credit utilisation ratio low

Credit utilisation is the percentage of your credit limit that you are currently using. The higher your credit utilisation, the more it can impact your credit score negatively. Try to keep your credit utilisation below 30% of your credit limit. For instance, if you have a credit limit of Rs. 1 lakh, avoid using more than Rs. 30,000 at any given time.

Tip 3: Limit your credit applications

Avoid applying for multiple loans or cards at the same time. Every time you apply for one, your lender generates what is called a credit enquiry. Too many enquiries can make you look hungry for credit and impacts your CIBIL Score negatively. Apply for credit only when necessary and avoid applying for multiple credit products within a short period to ensure a healthy CIBIL Score.

Tip 4: Maintain a healthy credit mix

Your credit mix refers to the diverse types of credit accounts that you have, such as credit cards, loans, or mortgages. Having a healthy mix of credit accounts can positively impact your credit score. However, it is crucial to ensure that you can manage your credit accounts responsibly. Avoid taking on too much debt or opening too many credit accounts at once, as it can negatively impact your credit score.

Tip 5: Monitor your credit report regularly

It's essential to monitor your credit report regularly to ensure that there are no errors or inaccuracies that could impact your credit score. You can get a free credit report from CIBIL once a year, and it's advisable to check your report at least once every six months. If you notice any errors or inaccuracies, you can dispute them with CIBIL and get them rectified.

Bonus Tip: Avoid closing old credit accounts

Closing old credit accounts may seem like a good idea, but it can negatively impact your credit score. When you close an old credit account, you reduce the length of your credit history, which can negatively impact your credit score. If you have an old credit account that you are not using, it's better to keep it open and use it occasionally to maintain a healthy credit history.

In conclusion, your CIBIL Score is a critical factor in determining your creditworthiness. By following these simple tips, you can improve your credit score and increase your chances of being approved for loans and credit cards with better terms and interest rates. Remember to pay your bills on time, keep your credit utilisation low, maintain a healthy credit mix, monitor your credit report regularly, and avoid closing old credit accounts. By doing so, you can maintain a healthy credit score and achieve your financial goals.

Improving your credit health and raising your CIBIL score takes time and commitment. But with the right tools and knowledge, you can make significant progress and achieve your financial goals.

Bajaj Finserv offers you a smart online facility to help you check your CIBIL Score for free. All you have to do is enter a few basic details on the website and look at your latest credit score. Please note that checking your score on the Bajaj Finserv website has no impact on your actual score.

Remember to be patient and stay committed to good credit habits, and you will see that your credit health improves over time.