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Here’s how you can improve your Credit Score

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Using your credit cards wisely, opting for EMIs that are easy on the pocket are some of ways that can help you to improve your credit score.

A good CIBIL score is a dream of most people. After all, a good CIBIL score will ensure that you land with the best loan interest rates and attractive credit card offers. But maintaining a good CIBIL score is harder but don’t worry we are here to help. But before we list out the ways to increase your CIBIL score, let’s first understand on what is CIBIL score and the factors on which it depends.

CIBIL score assesses the credit worthiness of the individual borrower and is mandated by the Reserve Bank of India. It helps banks and credit card companies to evaluate the potential risk of lending money to their consumers.

The CIBIL score ranges between 300 and 900. A score closer to 900 represents a good credit history and a score close to 300 signifies a poor credit history which may lead to your loan getting rejected. The CIBIL score depends on various factors such as past performances, credit exposure, credit type and duration and other factors. Past performances carry the highest weightage of 30%.

Here are some of the things that you can do or keep a track of to improve credit score:

Appeal errors:

To err is human and it very likely that errors can take place and typographical data entry errors may also creep up. Hence, it is important to appeal for such errors on the CIBIL website. The financial institutions have to address the appeal within 30 days. Once the mistake is corrected, the credit score will also improve automatically.

Use your credit card wisely:

This is where many of us go wrong and screw our credit score. It is fun to use credit card but the charges and interest rates are just the opposite. It is very easy to fall into the credit card trap. You may either forget to pay the balance or you may not have enough money to pay back. And not paying the balance on time adversely impacts on your credit score.

Also, to maintain a healthy CIBIL score, you should not exceed 80% of your credit card limit. For e.g. if you exceed 90% of the credit limit month on month, it is likely to hit your CIBIL score.

Don’t throw away your older credit cards:

Typically, we tend to deactivate credit cards that we no longer need. However, keeping older credit cards can help you to build a strong credit history which will help you to increase and maintain a good credit score.
Take a longer tenure loan: EMIs eat into our monthly income and sometimes the EMI may be too heavy on our pockets. Missing loan EMIs is not good for your CIBIL score. Hence, before such situation pops up, it is better to take a loan for longer tenure with easy instalments.

Avoid too much debt at one time:

If you have too many loans ongoing, it would be a wise decision to trim some of the loans. This would help you to increase your CIBIL score. Start with the loan with the highest interest first. If you have too many loans and you are unable to pay the EMIs, it will adversely impact the CIBIL score.

Improving the CIBIL score is a continuous process. Here are few mistakes that you should avoid if you want to improve your credit score.

Taking too many unsecured loans. Having a mix of secured and unsecured loan, short and long term credit will help to improve your credit score.
Missing credit card or EMI payments. Set reminders so that you don’t miss the last date to pay the credit card balance without extra charge.
Spending your credit card on unnecessary items. Exercise restrain or don’t carry your credit card when you believe that you are likely to swipe your credit card.

Conclusion: A healthy credit score is an important aspect in any adult’s life. It can help you get good deals on loans and credit. It can also come in handy when faced with an emergency situation when you need to take loans.

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