Cibil Score – Increase Cibil Score using these tips mentioned on this page. Four-credit bureaus in India generate credit scores based on your credit history. Credit-based products are approved by lending institutions based on your creditworthiness. Specific lenders now offer risk-based pricing for certain loans and classify customers according to their credit score—the lower the risk, the lower the interest rate. First, let’s go through with the knowledge of Cibil Score and understand what it is.
- CIBIL score: What it is?
- What do CIBIL’s credit history and report mean?
- CIBIL credit scores: why are they important?
- The CIBIL Score: How Is It Calculated?
- CIBIL Score Improvement: How to Increase It Fast?
- 1. Make timely payments on credit cards
- 2. Utilize credit only to the limit in Cibil score
- 3. Credit cards with new features
- 4. Make sure your credit report is up-to-date
- 5. Consider Different Credit Types
- 6. Credit card limits should be increased
- 7. Report old debts to the credit bureaus
- 8. Never hint at risk
- 9. Do not open multiple lines of credit
CIBIL score: What it is?
A credit information company licensed by the Reserve Bank of India is Credit Information Bureau (India) Limited (CIBIL). Three other companies are also permitted to function as credit information companies by the RBI. Highmark, Equifax and Experian make up the trio. CIBIL scores are most popular in India, however. Let’s find out what CIBIL score is.
There are 600 million individual credit files and 32 million businesses maintained by CIBIL Limited. CIBIL India is a subsidiary of TransUnion, a multinational group based in the United States. For this reason, credit scores in India are called the TransUnion CIBIL scores.
Scores range from 300 to 900, based on your credit history, rating and report. You have a better credit score if your score is closer to 900.
What do CIBIL’s credit history and report mean?
You must ask yourself when you want a loan? What is my CIBIL score? What are my chances of being approved for credit? Using your credit history, your bank will determine whether you are credit-worthy.
Does a credit report record that is my CIBIL score? Credit history is a record of a borrower’s repayment history. A borrower’s credit history is obtained from various sources, such as banks, credit card companies, collection agencies, and government agencies. Credit scores are computed by applying mathematical algorithms to credit information to predict your creditworthiness.
To obtain a satisfactory CIBIL credit score, you usually need to use credit for 18 to 36 months.
CIBIL credit scores: why are they important?
Loan applications are heavily reliant on the CIBIL score. Banks and financial institutions generally check an applicant’s credit score and report before approving a loan application. In some cases, a bank may not even consider an application if the CIBIL score is low. Credit-worthy applicants with a high CIBIL score will be investigated, and the lender will take other details into account.
When it comes to CIBIL scores, the higher your score, the higher your chances of getting approved for a loan are. Loan/credit card approval is solely a matter for the bank, and CIBIL does not in any way decide if the loan or credit card should be approved.
Scores over 700 are generally regarded as good.
The CIBIL Score: How Is It Calculated?
CIBIL scores are calculated based on payment history, length of payment history, credit applications. The lender will take other details into account the debit amount and credit mix. Each of these factors is given a different weighting. Maintaining a good score requires ongoing effort.
CIBIL Score Improvement: How to Increase It Fast?
There is a range of 300 to 900 CIBIL scores. Scores between 300 and 549 are considered low, while 550 to 700 are considered average scores. You may find it easier to obtain loans if your credit score is top-notch, but this can also backfire.
CIBIL requires a 700 or higher score for a personal loan. It is crucial to keep an eye on anything below 700. The situation is not hopeless, however. You cannot change your credit score overnight, but you can make significant and minor changes in your financial habits.
The following tips can help you raise your CIBIL score:
1. Make timely payments on credit cards
To improve your credit score, you should pay your outstanding credit cards. If you pay the necessary amount due as shown on your credit card statement, you might avoid charges for late payments. Approximately 5% of the billing amount is expected in this minimum amount. Eventually, this will lead to a mountain of debt when interest and taxes are added.
Paying your dues on time not only prevents interest from piling up but also improves your credit score over time.
2. Utilize credit only to the limit in Cibil score
You can protect your credit score by using less than 30% of your credit card limit. However, you can adversely affect your credit score if you don’t use your credit card at all. Paying off your credit card balances in advance is recommended. When you use your credit card more than 30% of the time, it is considered high credit utilization, so it is advisable to opt for a higher credit limit. It will increase your credit score quickly. Limiting your loan applications is also a good idea. Your score can also be adversely affected if you apply for multiple loans.
3. Credit cards with new features
Credit card applications should be handled with caution. Having a large number of credit cards and making large purchases might prove counterproductive when applying for loans. It is a good idea to check your credit eligibility before applying for a credit card and apply to banks where your loan application has a greater chance of getting approved. Your credit score can be negatively affected by spending excessive amounts on your credit card and applying for credit cards from several banks simultaneously.
To avoid lenders believing that you are continually seeking credit, maintain a reasonable gap between applications. If you can repay a credit card, you gain points, and your credit score will increase.
4. Make sure your credit report is up-to-date
Keep an eye out for inconsistencies and errors in your credit report. About 20 percent of customers had errors on their credit report in a study done by the Federal Trade Commission in 2012. According to a repeat study conducted in 2015, customers who reported an unresolved error still believed the report contained errors. Borrowers are legally entitled to one free credit report per year from credit bureaus.
Online marketplaces have also simplified the monitoring of credit history. There could be errors in your report if you provide incorrect information, fail to update the description, or update essential details. Having a negative credit score as a result of these errors can be devastating. You can report and rectify errors as soon as they occur.
5. Consider Different Credit Types
Credit, if obtained wisely, is helpful since people with no credit history generally have a lower CIBIL score, making it difficult for them to get loans. To improve your credit history, it is advisable to include various types of credit in your portfolio, such as personal and secured loans, long-term loans, and short-term loans.
Taking this step before applying for a loan can make your chances of receiving a loan that is larger and at a lower interest rate higher.
6. Credit card limits should be increased
If you increase your credit limit, your credit utilization ratio will be lowered, and your credit score will be raised.
By exceeding your credit limit, you will be classified as a high-risk borrower by credit scoring models. Your risk of default increases as you approach the total limit of your credit limits (or pass a specific limit). Your credit score is negatively affected even though the risks don’t directly affect you.
Therefore, increasing your credit limit before making any additional purchases is wiser. Thus, you have the opportunity to manage your credit wisely, keep your credit utilization low, and increase your credit score in the long term.
7. Report old debts to the credit bureaus
Credit scores are determined by your past credit behavior, which determines whether your loan application will be approved or denied.
Keeping records of your good old loans on your credit report increases your credit score. In the end, repayment of debt within the agreed time frame improves your creditworthiness, as well as your income potential.
Keeping your good accounts open for as long as possible is another way to improve your credit score. The most common tactic used by business enterprises is this one. Credit accounts are kept as active as possible to boost credit scores.
8. Never hint at risk
Models used to score credit profiles are designed to detect early signs of stress and risk.
The first sign of stress in the borrower’s credit profile is not making credit card payments, suddenly paying less than the total due amount, or revolving credit. Other signs of stretched cash flow include taking cash advances or using credit cards for business expenses.
9. Do not open multiple lines of credit
Examination of your credit profile. Each time you open a new credit line, your credit report is impacted by a hard inquiry. As a borrower, you are assessed for risk through a detailed, Credit history which is a record of a borrower’s repayment history.
Multiple hard inquiries in a short period can negatively affect your credit score because hard questions are reflected on your credit report for two years. When a loan application is rejected due to a hard inquiry, it can be highly damaging.