CIBIL score is increasingly becoming a measure of one's credit worthiness. It is one of the most important qualifying criteria used by the banks to approve loans. A low CIBIL score can hamper your chances of getting approved for loans and credit cards. Even if you do get approved, a bad credit score will prevent you from getting the best interest rates.
If you haven’t been quite responsible with your loan and credit card payments in the past, you may have a bad score. But the good news is that you can take steps to improve your credit situation. Catching up on the past due bills is the best way to start your journey towards rebuilding credit. But just doing that won’t be enough if you had a very low CIBIL score. You will need to really prove to the lenders that you have mended your habits and become serious about handling your loans and other debts responsibly. Here we have listed down some ways that can help you improve credit score.
Delinquencies and collection accounts have a major role in bringing your score down. But with regular on time payments you can overshadow the effect of your past mistakes. If you are behind on any payments, bring them current as soon as possible. Going forward, ask your bank to send an email or text message whenever the payment is due, set payment reminders on your mobile, enrol for automatic payments where the instalment gets deducted from your account. Do what it takes to remind you that the payment is due. By paying bills on time you will be able to prove to your lenders that you are a reliable borrower.
Credit utilization ratio is the ratio of the outstanding balances on credit card to the total available credit limit. High outstanding balances increase this ratio and signify an over reliance on credit. In order to improve credit score, you should pay down the credit card balances to free up the credit limit. Also, going forward make sure that you do not use more than 30% of available credit limit.
Your CIBIL score is entirely based on the information recorded in your credit report. Sometimes errors in the credit report or incorrect reporting may be the reason for a low score. If the payments that you made on time didn't get recorded, your score may dip. A regular check of the report helps in uncovering such errors. Dispute the errors online to get the report corrected.
Your credit score gets affected by the age of your accounts. The longer the credit history the better it is for the score. If you have a solid repayment track record on an a loan account, it helps in boosting your score. So do not close your old accounts especially the ones with a good history of payments.
Apply for credit only when necessary. If you apply for too many credit cards thinking that it will give a bounce to your credit limit and reduce utilization levels think twice. Opening too many accounts means a number of hard enquiries hit your report and bring your score further down. Also too many credit cards tempt you to spend more than what you can afford and accumulate debt.
When you take the above measures to improve credit score do not expect a miracle to happen all of a sudden. There is no quick fix for improving credit score. So work with patience and discipline.