If you are in the process of securing a loan, the first factor that lenders consider is your CIBIL score. A CIBIL score below 650 could reduce the chances of getting a loan. Or, you would be offered a loan at a higher interest rate. If you have a low CIBIL score, fret not! Here’s how to increase CIBIL score in 11 smart ways. Check them out!
|CIBIL Score Range||Rating|
|300 – 500||Poor|
|550 – 650||Average|
|650 – 750||Good|
|750 – 900||Excellent|
You must keep these points in mind to increase your CIBIL score and enjoy the benefits of a high CIBIL score.
If you find any inaccurate data in your CIBIL records, you need to raise it to the CIBIL (Credit Information Bureau Limited) for correction. This will help rectify your CIBIL history and increase your scores.
Borrowers must remember to repay their outstanding credit card debts on time. Missing due dates or late payments will directly bring down their credit scores. It will also reflect their organised approach towards financial management. One can set up reminders or enable auto-pay options to avoid missing credit payments.
According to historical data, limiting one’s credit utilisation to 30% helps to keep up one’s credit score. On the other hand, having a high credit utilisation of 50% can harm a user’s CIBIL score.
Using it less will prevent a cardholder from optimally increasing his/her credit score. Credit cardholders can set their card limit in a way that prevents credit utilisation from increasing above 30%.
It is a common misconception that checking your credit report regularly can bring down your CIBIL scores. However, this is only sometimes the case. A borrower checking his/her credit reports online is a soft inquiry. These credit inquiries do not affect a person’s CIBIL score.
In contrast, when credit card companies take up inquiry requests from lenders to check borrowers’ credit reports, it is called a hard credit inquiry. Hard inquiries usually happen when card owners apply for a new loan.
Frequent hard inquiries can lower your CIBIL score. Therefore, credit card owners are suggested to take loans infrequently to avoid multiple hard inquiries. In this way, they can boost their CIBIL score.
If you are repaying more than one debt, it is mandatory to keep an eye on your CIBIL record after every repayment. This will help you monitor any discrepancies in your credit report if any arise.
Regularly monitoring your CIBIL score will allow you to report any error in time and prevent your score from falling.
Another common misconception is that credit cards no longer in use will automatically be deactivated. However, this is not the case. Old credit cards with no outstanding loans are a boon in disguise. Owning them can bring an impressive boost to your CIBIL score.
Therefore, cardholders must hold on to these cards instead of closing them to improve their credit rating.
Loan applications can be rejected when borrowers do not possess enough money in their accounts. Low CIBIL scores can also lead to loan rejection.
If you keep applying for new loans, it will negatively impact your credit scores. Therefore, you should wait and increase your account balance or clear outstanding loans for a certain period. After this, you can resume applying for a new loan if you meet the eligibility criteria.
Borrowers can diversify their credit portfolios to achieve better CIBIL scores. To do so, they need to have the right amount of secured and unsecured loans with both long and short tenures.
With multiple debt obligations, borrowers should ensure they have enough funds to repay the long-tenure loans after repaying the shorter ones. To maintain such a balance, borrowers must calculate their existing liabilities before applying for new loans.
Opting for longer-tenure loans helps you avoid missing due dates or defaulting on loans during a financial crunch. In addition, due to their flexible tenure, long-term loans can help you manage your finances and pay conveniently.
Thus, choosing a loan with longer tenure can help you increase your CIBIL score.
This is the most crucial rule for borrowers to increase their CIBIL score. Timely payments of EMI will let the credit score rise. Conversely, late or missing repayments can dramatically decrease these scores.
Therefore, borrowers’ sole responsibility is to maintain a healthy repayment habit.
If you are opting for a joint loan application, you must watch out for your partner’s spending habits. If a co-applicant has a reckless or spendthrift nature, it can lead to a fall in CIBIL scores for both.
Similarly, if you missed one repayment, the CIBIL score will decrease for both of you. Therefore, it is necessary to choose a co-applicant wisely before going for a joint application.
Many reasons could affect your CIBIL score:
If you tend to use more than 50% of the credit limit set by your lender, your credit score will plummet. The credit limit is set considering your income and it sets a limit on your expenditure. Using more than 50% of your credit limit could signal your financial irresponsibility, resulting in a low CIBIL score.
Unpaid debts like telephone or electricity bills can also hamper your credit score. These outstanding credits can reflect indiscipline in one’s finances. This can further lower an individual’s credit score. To avoid such a scenario, borrowers must repay all or most of their outstanding loans before opting for a new one. In this way, they can improve their CIBIL scores and prevent themselves from being overburdened with debt.
The most common reason for a low CIBIL score is the late payment of loan dues. Delayed payment, even by a day, could lower your credit score. It signals the lenders that you are unable to pay your dues on time. As a result, your credit score can take a hit.
If you have applied for multiple loans in a short period of time, it can lower your credit score. While your need for money could have a genuine reason, taking small loans from multiple lenders makes the lenders doubtful whether you will be able to repay so many loans on time.
A good CIBIL or credit score is considered to be above 750. This shows lenders that you are trustworthy and are capable of repaying the loan on time. A good CIBIL score also increases the possibility of getting loan approvals quickly and at a lower interest rate. Even to get a personal loan, the minimum CIBIL score is between 720-750.
Having a good credit score is always recommended because a good score gives you many benefits, such as:
Now that you know how to increase CIBIL score, try to maintain a high credit score so you get the loans approved quickly. Keep a tab on your CIBIL score so that you can take corrective measures when the score reduces. Calculate your credit score online and check it every six months. Don’t worry if your CIBIL score is not high, using the 11 ways mentioned is going to help you get your loan approved. For easy and hassle-free loan approval in a 100% paperless manner and flexible EMI options, just download the Navi App and apply now!
Ans: There are different websites and mobile applications, like the Navi app, which allow you to check your CIBIL score free of cost. However, if you want a full credit report, the report would be prepared and issued by authorized credit bureaus and that would cost money.
Ans: Lenders allow loans if you have a credit score of 750 and above. Check the eligibility parameters of the lender to find out the minimum CIBIL score for the personal loan required.
Ans: The minimum CIBIL score to get a personal loan is between 720-750.
Ans: No, try and maintain your credit cards even if you don’t use them. This is because each card allows you a credit limit and the higher the credit limit the lower would be your credit utilisation ratio which would, in turn, give you a high credit score. So, maintain your cards for maintaining your CIBIL score.
Ans: Credit hunger refers to an individual’s nature to keep applying for more loans and credit irrespective of his/her credit score. Unlike credit savvy individuals, credit hungry individuals do not take into consideration their income source, existing loan accounts or debt to income ratio before applying for a new loan. This behaviour adversely affects their CIBIL score and reduces their chances of being eligible for future loans.
Ans: To increase your CIBIL score from 600 to 750+, you need to build a strong credit history, manage loan payments efficiently, not close your old credit accounts, pay EMIs on time and monitor your credit report. If you have a good CIBIL score like 750 or above, getting a loan would be a breeze.
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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