Increase CIBIL Score: 8 Guaranteed Ways to Boost It Immediately

Having a strong CIBIL score an unlock lower interest rates and more favourable loan terms. Your CIBIL score is a critical factor that lenders consider when assessing your creditworthiness. Good credit behaviour helps build a good CIBIL score. Here we have eight tips for you that will help improve your CIBIL Score.

A Credit Score is a three-digit score ranging between 300-900 that depicts your creditworthiness as a borrower. The higher your score, the higher is your creditworthiness, and the higher your chances for you to get a loan. A high credit score also helps you negotiate lower interest rates as well as better deals on credit cards and personal loans. This credit score is calculated by credit information bureaus based on various factors. In India, there are 4 licensed credit bureaus that prepare credit scores which are TransUnion CIBIL, Experian, CRIF High Mark, and Equifax. A credit score calculated by CIBIL is called CIBIL Score.

As we now know, CIBIL Score ranges between 300-900, and the higher your score, the better it is. But, a CIBIL Score above 700 is generally considered good. Let’s take a look at some CIBIL Score ranges based on their rating.

1. Repaying your dues on or before time

This should be a no-brainer. Paying your credit card and loan dues on or before time has the highest impact on your CIBIL Score. Missing your EMI payment or credit card bill by even a day can impact it badly. Hence, you should always be disciplined in paying your dues. Maintaining a filing system for your monthly bills and setting alerts for the same can help you make payments on time. You can also look to automate your payments so that you don’t miss a single payment.

2. Keeping your Credit Utilisation Ratio lower

Credit Utilisation Ratio or CUR has the second highest impact on one’s CIBIL Score. CUR means the proportion of credit one uses against the total limit available. The lower amount of credit that you use out of the allotted amount, the better it is for your CIBIL Score. On the other hand, if the amount of credit you use is high then it can negatively impact your CIBIL Score as well. Generally, one should aim to keep the CUR lower than 30% and one good way to achieve this ratio is to adjust your credit limit in such a way that your expenses amount to a CUR of 30% or less.

3. Avoid applying for New Loans at once

Whenever you file an application for a new credit card or a new loan, creditors make a hard inquiry about your profile. This can also have an impact on your CIBIL Score. Let us tell you how. Basically, there are two types of inquiries in your credit profile, a hard inquiry and a soft inquiry. Whenever you check your own CIBIL score at regular intervals, or some already existing creditor checking it for their internal purpose, this is called a soft inquiry. This is like a regular check-up and it doesn’t affect your CIBIL score.But when you apply for a new loan or a new credit card, a creditor has to check your creditworthiness and the existing loans that you have in order to decide whether they want to give a loan and at what interest. This is called hard inquiry and it has an impact on your CIBIL Score. An occasional hard inquiry is okay and it doesn’t impact your CIBIL Score much but when hard inquiries are made in a short period of time, it impacts your CIBIL Score in a negative manner.This is because too many hard inquiries indicate that you are not disciplined with your loans and are in desperate need of a loan frequently therefore a potential defaulter. One good way to avoid this is to avoid applying for new loans in a short period of time and if needed, make sure to have enough gap between two loan applications. Also Read: Check Your CIBIL Score for Personal Loan in 3 Easy Steps

4. Check your CIBIL Report regularly

It is important that you keep an eye on your loan accounts at regular intervals. Checking your CIBIL report regularly gives you an insight into your loan accounts and helps you stay updated about them. You can also easily identify errors or misinformation in your CIBIL report if any and can take immediate action on the same.

5. The Older your credit history, the better it is

Whenever a creditor wants to give you a loan, they check your creditworthiness. Your CIBIL score report contains the history of every possible loan that you’ve taken. And if you have a long history of loans and a history of paying them regularly, this creates a positive impact and implies that you are good at managing your loans and disciplined with your repayments. Hence, it is always advisable to keep your loan accounts as old as possible.

6. Keep your old Credit Cards and loan accounts open

There might be some old credit cards of yours that you don’t use currently or some loan accounts that you don’t need. Closing them down might not be a good choice and can impact your credit score. When you close a loan account, it moves out of your CIBIL report and impacts the average age of your credit. This can impact your credit score as the average age of your loan accounts will decrease.Closing loan accounts also reduces the total credit available to you and hence it might impact your CUR as well because your CUR will go up with lower total credit and with the same spending. Hence, it is better to keep them as it is if maintaining the records is not a problem for you.

7. Keeping a healthy Credit Mix

Diversification in loans is also a thing and just like in investing, diversifying your loans is also beneficial for you. Having a variety of loans; secured and unsecured, long-term and short-term , and credit cards will help you build a strong credit score. Having multiple loan accounts and being regular in the repayments only has a good impression on a creditor. It will help you negotiate better loan terms in the future if you borrow a new loan. Hence, it is always better to have a mix of credits in your portfolio.

8. Avoid settlements in your loans

The closure of a loan account and settlement of a loan are different and have a different impact on your credit score . Whenever you are in some difficulty and the creditor offers you a one-time settlement option, you should keep it as a last resort. One-time settlements are usually at a lower amount than your total dues and are also reported in your CIBIL report for a long time. This will impact your CIBIL score very badly and can be a problem when you apply for new loans. Also Read: What Are The Disadvantages Of Having A Bad CIBIL Score?

Building up a CIBIL score is typically easier than maintaining a good score. Once you get your CIBIL score, it takes time to improve it, but it doesn’t take time to make it badHence,developing a good credit score over the course of few months and achieving an excellent score over many years requires both patience and a lot of discipline.With these tips, you’d be able to maintain your CIBIL score and improve it over time.