Be loan ready : 10 ways to maintain a healthy CIBIL score
4 min read . Updated: 15 Dec 2022, 05:06 PM IST
PremiumCIBIL score plays an important role in borrowing or taking loans. That's why it is important to maintain a good CIBIL score. Know ways to maintain a healthy CIBIL score
CIBIL score is the reflection of a person’s credit history and is a major measuring tape for banks and other financial institutions of the credibility of a borrower. The CIBIL score, aka credit score, is generated by CIBIL which is one of the credit bureaus in India.
To get your loan approved instantly, it is important to maintain a good CIBIL score. All it takes is punctuality, sincerity, and consistency, in installment repayments to maintain a good score CIBIL. Here are ten ways in which you can maintain a good CIBIL score.
How is CIBIL score calculated?
Unlike calculating numbers, the CIBIL score is calculated by keeping in mind a range of factors including payment history, length of payment history, number of unpaid loans, debt amount, credit mix, etc. An excellent CIBIL score comes in the range of 750-900. A good CIBIL score comes in a range of 650-750. CIBIL score ranging between 550-650 comes in the average category, and the one coming in the range of 300-500 comes under the poor category.
Below are the things to keep in mind to improve CIBIL score:
Be Disciplined with instalments
Make sure to pay loan instalments on time. Repayment of current debt plays an important role in identifying the CIBIL score. It is worth noting that non-repayment of a loan or delay in paying instalments can drastically affect your CIBIL score. Hence, it is advised to set reminders and add loan instalment dates on your calendars to avoid last-moment chaos. It is also important to repay credit card dues on time. Otherwise, that can also affect your CIBIL score
Reduce your credit limit
Another important measure to ensure a good CIBIL score rating is to optimise credit utilisation. This means one needs to curb their credit amount or cut down on their spending to reduce the use of credit cards. Minimum utilisation of credit cards can save you from any potential damage to your credit score. Apart from that, one needs to be cautious while applying for loans. Going for multiple loans in a single go can harm credit score.
Stay away from too much debt
No matter, how low-interest rates and several customer benefits lure you to borrow money and spend, make sure to take a loan or use a credit card only to suffice your needs. A larger amount of debt can affect your CIBIL score. There should be a limited number of loans upon you during a fixed duration of time.
Self examine your CIBIL reports and CIBIL score
Checking your CIBIL score and CIBIL report will save you any kind of degraded CIBIL rating due to some mistake in your documents or some other issue. One can request their CIBIL report by visiting www.cibil.com. At times, there are some discrepancies while updating your record or while uploading documents. Regularly checking the CIBIL report will help you in rectifying such mistakes on time.
Be mindful of new credit cards
Buying new credit cards might help in getting loans, but the measure can go counterproductive as well. Having excessive credit cards and extravagant spending can badly impact your credit score. Hence, it is better to be mindful while applying for a credit card and check your CIBIL score once before applying. It is better to get a credit card from a bank where the chances of getting a loan are higher.
Diversify credit types in Portfolio
Instead of sticking to a specific type of credit source for a long time can harm your CIBIL score. In this case, it is better to explore options of credit so that CIBIL score doesn’t become a hindrance to your way spending. People can include a mix of credit sources including personal loans, security loans, long and short-term loans, etc.
Borrow to create a credit history
To have a good credit score, it is important to take out loans or credit in the past. For those who haven’t taken any credit in their past there are chances that they have a low credit score. Hence, it is advised to create a good credit history by borrowing or taking credit.
Increase your credit limit
An instant way to improve your credit score is to increase your credit limit. This will reduce your credit utilisation ratio and will ultimately boost your credit score. Over utilising your credit limit is never a good practice for healthy CIBIL score, as it may shoot your credit utilisation ratio increases the risk of default. Hence, overutilisation of credit limit can majorly impact your credit score and that can be avoided by increasing your credit limit.
Go for a longer-duration loan
It is always advisable to decide the tenure and EMI amount of a loan based on one’s financial capability. In case of any doubt or confusion, one should always prefer to opt for a longer tenure of loan, which will reduce the EMI amount. This will make it easy for you to pay EMI on time and help in improving CIBIL score.
Be cautious of joint accounts
Always be careful before agreeing to become a joint account holder or a guarantor of someone else’s loan. Any default on a loan will impact your CIBIL score. That’s why it is advisable to take this role only for those whom you trust well.
