The CIBIL score is a 3-digit number that reflects your past behaviour with credit. Lenders check this number to ascertain your creditworthiness and the risk of a potential default. You can check your credit score online by visiting the official CIBIL website or using the provision on partner websites.
A score of 750 or above is considered optimal to get a higher loan amount at affordable interest rates. A CIBIL score range of 700-749 is considered good, and you can qualify for most loans.
However, if the score is below 600, you may have difficulty getting approval. Thankfully, there are ways to reach the desired CIBIL score range by working on a few parameters. Read on to understand a few tips that can help boost your CIBIL score and allow you to avail loans on affordable terms.
Assess Your Credit Report Properly
This is one of the most crucial steps to implement while working towards a healthy CIBIL score. Check the report regularly, as your final score depends on the details mentioned in it.
You can view and download the credit report when you check credit score online on the official CIBIL website or any lender’s portal. This report contains essential particulars, such as the following:
Your personal details
Account details of every credit you availed
Score inquiries from various lenders
You must assess these details to check for errors or other discrepancies. For instance, assume you have repaid an older loan, but it still shows as an open account. This is a major error, and you need to report it immediately.
Checking the report and correcting any errors on time can boost your score and help you monitor for fraudulent activities. Thus, check the report regularly to assess your financial standing and prevent any damage that can decrease your score.
Avoid Late Payments
This is another critical factor in helping you reach the optimal CIBIL score range. When you avail any form of credit, such as a home loan or credit card, ensure that you do not default on monthly repayments.
Paying your monthly instalments and credit card bills without delay has a positive impact on your CIBIL score. You need to follow this to build a healthy credit score over time. One way to ensure you do not miss these payments is by choosing the auto-debit option in your bank account.
All you have to do is provide a standing instruction to your bank to debit the monthly instalment amount from your account on a specific date of every month. This way, being diligent with your repayment can help you maintain or build an ideal credit score.
Remember that even a single late payment can affect your score negatively, which may take several months to recover from.
Minimise Your Credit Utilisation Ratio
The credit utilisation ratio is the amount of credit used from the maximum sanctioned limit. Keeping a credit utilisation ratio below 30% is ideal, as a higher ratio indicates you are hungry for credit.
This can harm your CIBIL score. To help you understand this better, consider an example. If the credit card limit is ₹1 Lakh, you should ideally use up to ₹30,000.
Doing so helps lenders perceive you as a responsible borrower. When you check your credit score online, it also helps you assess your spending behaviour, helping you keep tabs on your monthly transactions.
Limit Yourself from Applying to Multiple Debts Simultaneously
Applying for different types of credit cards or loans in a short timeline can have severe repercussions on your CIBIL score.
This is primarily because lenders initiate a hard inquiry into your credit report when you apply for a new credit card or a loan. When you check your credit score online, it is considered a soft inquiry causing no harm to your CIBIL score.
On the contrary, a formal inquiry by lenders, called the hard inquiry, can lower your credit score. If multiple lenders continue initiating a hard inquiry on your credit report, your score will drop noticeably.
Hence, it is essential to apply for a new credit only if it is necessary and after you assess the eligibility criteria.
Maintain a Diverse Credit Portfolio
When you maintain a diverse portfolio, this helps boost your credit score. This shows that you can manage various kinds of secured and unsecured loans. Lenders trust such borrowers, who can clear their outstanding loans or credit card bills without defaulting.
However, make sure not to go overboard and opt for more debt than you can handle. Always check your repayment ability before opting for any new credit. This helps you reach the ideal CIBIL score range in no time.
To sum up, following the aforementioned tips can help you better your CIBIL score and get a loan at affordable rates. That said, achieving an optimal CIBIL score range takes time and requires patience. With proper discipline, you can easily let your credit score soar in no time and avail loans hassle-free.