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What is the fastest way to improve your CIBIL score? Follow these 9 steps
One should check the credit report, pay bills on time, reduce credit utilisation ratio, avoid multiple credit applications and maintain a mix of credit types in order to improve the CIBIL score
Improving your CIBIL score (or credit score) requires consistent effort and responsible financial behaviour over time. For instance, Ajay Gupta, a Bengaluru-based software engineer in his early 30s, learnt that his Cibil score is 620, and now wants to improve it.
He realised that this partly happened because he maxed out his credit card and most of his credit comes from credit card. One of his friends told him that improving the score will take some time and requires a set of steps.
Here we mention some of the steps that Ajay, like anyone else, can take to improve the CIBIL score quickly:
These are the key nine steps one can take
Check your credit report: Procure a copy of your credit report from CIBIL or other credit bureaus in your country. Review it carefully for any errors or discrepancies that could be negatively impacting your score.
Pay your bills on time: Payment history is one of the key factors affecting your credit score. Make sure to pay all your bills, including credit card bills, loan EMIs, and utility bills, on time to avoid negative marks on your credit report.
Reduce credit utilization ratio: Keep your credit card balances low relative to your credit limit. Aim to utilize no more than 30 percent of your available credit limit. High credit utilisation can negatively impact your credit score.
Avoid multiple credit applications: Each time you apply for credit, it generates a hard inquiry on your credit report, which can temporarily lower your score.
Maintain a mix of credit types: Having a diverse mix of credit types, such as credit cards, loans, and mortgages, can positively impact your credit score. However, avoid opening new accounts just to improve your credit mix.
Regularly monitor your credit score: Keep track of your credit score regularly to gauge your progress. Many banks and financial institutions provide free access to credit scores for their customers.
Monitoring your score can help you identify areas for improvement and track your success.
Address past due: If you have any accounts that are past due, work to bring them current as soon as possible. Contact your creditors to negotiate payment plans or settlements if necessary.
Keep older accounts open: The length of your credit history is an important factor in determining your credit score. Keep older accounts open, even if you're not actively using them, to demonstrate a longer credit history.
Consider credit building products: If you have a thin credit file or a low credit score, consider applying for credit builder loans or secured credit cards. These products are designed to help individuals establish or rebuild credit.
If you are still struggling to improve your credit score on your own, consider seeking assistance from a credit counsellor or financial advisor.
It is vital to remember that improving credit score takes time and patience. Focus on adopting responsible financial habits and consistently monitoring your progress.
Frequently Asked Questions:
How do student loans help establish credit history?
Student loans can help you establish a credit history if they are your first credit accounts. Your payment history, including student loan payments, is one of the most critical factors in determining your credit score.
Do student loans add to the credit mix as well?
Yes, they certainly do. They add diversity to your credit mix especially if they are your only instalment loans.
Why is this important to pay bills on time?
Payment history is a significant factor in determining your credit score. Even a single missed or late payment can negatively impact your score.
Is payment of debt enough to maintain a good CIBIL score?
Paying off debt is indispensable to maintain a good credit score. However, it is a responsible financial management that leads to a good CIBIL score.
How does reviewing credit score help?
It is vital to monitor CIBIL score regularly to track your progress and identify any changes.
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