If you want to borrow money from any financial institution, they will determine your eligibility for the loan based on your CIBIL score. The Credit Information Bureau of India Limited (CIBIL) score is an important number, and a high score will benefit you.
CIBIL – What Is It and Why Is It Important
CIBIL score is a numeric figure that sums up your credit history. The score is determined based on several factors like your credit payment history, number and types of loan accounts, credit inquiries, and outstanding loan amounts.
CIBIL score determines your creditworthiness. It is important because it helps the lender decide whether to grant you the loan or not. Look at the CIBIL guide to see where your score stands.
6 Ways to Improve your CIBIL Score
1. Make Timely Payments
Your payment history accounts for almost 35% of your credit score. This is higher than any other determining factor. If you were lethargic on your payments, 2020 is the time to start making your payments on time.
Set a reminder or automate the process if necessary. Set up autopay for the minimum amount due and pay the additional when you can.
2. Review your CIBIL Report
There may be errors in your credit report, so review it carefully. Look for accounts that aren’t yours, addresses you never lived or wrong information like late payments when you paid on time.
Incorrect information on the report will affect your score, so make sure everything is accurate.
3. Choose a Longer Tenure
When you take a personal loan, opt for a longer tenure. This will lower your EMI amount, which will ensure that you can pay the entire amount on time without the financial stress.
Since you would pay on time and wouldn’t skip or default an EMI payment, your credit score will go up.
4. Create a Credit History
If you never had a credit history, your CIBIL score will be low. To increase your CIBIL score, borrow a mix of credits which can include both secured and unsecured loans, short and long tenure.
This way, you can choose low-interest rates and higher loan amounts in the future if you choose to apply for a personal loan or any other types of loans.
5. Pay More Than the Minimum Due
Ideally, you should pay the entire bill on time. However, if you are unable to clear the entire bill in one go, try to pay at least more than the minimum amount due.
This will reflect a positive financial behavior towards paying your loans/debts, thus improving your CIBIL score too.
6. Don’t Apply Repeatedly if Rejected
If you have already applied for a loan or credit and got rejected multiple times, don’t repeatedly apply for it. Your CIBIL score will be affected if you put in too many loan inquiries with the lenders.
If your CIBIL score is low, use these methods to improve your score. The CIBIL score won’t improve overnight. It may take at least 6 months to a year for the CIBIL score to show any improvement. So, be patient.