If you talk about the importance of your CIBIL score, it is extreme as you cannot get any form of credit without a decent credit score. The CIBIL score is a three digit number that represents your credit rating on the basis of your credit history. This score varies from 300 to 900.
The larger your score is, the larger is your credibility and the easier for you to obtain any form of credit. Usually to get approvals on borrowing any credit such as a personal loan or a home loan, you need to have a CIBIL score above 700. Now that you have realized the importance of a good CIBIL score and the number you need to achieve, the next step is to determine how to improve and maintain your credit score.
If you want to increase your CIBIL score, you need to realize that it cannot be done in a day or two. You need to be regularly consistent in your approach and be serious about it. The decent time to achieve an actual change or increase in your credit score is around 6 months to a year.
- 1 ● Pay all your dues in a timely manner.
- 2 ● Having a balanced mix of secured and unsecured loans.
- 3 ● Avoid having excess debt.
- 4 ● Get a loan having a longer loan term.
- 5 ● Maintain a correct and accurate credit report.
- 6 ● Be consistent about your credit utilization ratio.
- 7 ● Be careful about other co-signed loans.
Here are some of the methods by which you can maintain and increase your CIBIL score-
● Pay all your dues in a timely manner.
It is very important to pay your EMI’s, credit card bills and other dues before the final date as late payments highly affect your credit score. Late payments make you suffer in many ways such as it will cost you heavy fines and it will highly drop your credit score. Therefore, you need to be careful about your timely payments.
● Having a balanced mix of secured and unsecured loans.
You need to be very careful about the types of credits you have borrowed. Having too many unsecured loans proves you as a credit hungry individual in front of the lenders and this will directly affect your credit score. Hence, it is necessary to have a balanced mix of secured and unsecured loans to maintain your credit score.
● Avoid having excess debt.
It is not manageable to have several EMI’s or several credit cards at a time. This makes you credit hungry and also it is difficult to pay all your dues at the same time. Skipping any payments will decrease your CIBIL score. Therefore, it is smart to have a decent debt at a time which is possible for you to repay on time.
● Get a loan having a longer loan term.
It is beneficial to take a loan with a longer repayment period in two ways. First benefit is you will have comparatively lesser EMI’s every month. The second benefit will be that you will have a longer credit history and a credit history of a longer age is considered as a strong one. Your credit score is affected by the age or repayment period of your loan accounts. As a result, the longer is your loan account, the better your credit score will be. Also, with every timely payment, your credit score will increase .
● Maintain a correct and accurate credit report.
If you have mistakes in your credit report, it will affect your credit score. To maintain a good and correct credit score, it is important to rectify errors in your credit report. Fill all your fundamental information such as your date of birth, pan card number, Aadhaar card number and other details correctly.
● Be consistent about your credit utilization ratio.
It is important to maintain your credit utilization ratio below 30% of your available credit limit. Exceeding this limit will prove you credit hungry, affecting your CIBIL score. You can distribute your expenses between two or more credits to achieve this benchmark and maintain your credit utilization ratio.
● Be careful about other co-signed loans.
If you have volunteered as a guarantor in other’s loans, then it is necessary to keep a check on the same as if in any case the borrower is not able to pay his dues on time, the only thing that will be affected by it is your CIBIL score.
The Bottom Line
Maintaining and increasing your CIBIL score is a crucial job which needs patience and consistency. You can use financial instruments such as credit cards or personal loans to increase your credit score, but that too will happen in at least 6 to 12 months. It is important to have a financially disciplined lifestyle to obtain any type of credit in future.
Not just for credit, but this lifestyle is beneficial to live a luxurious and tension free life. It is good for you also as it will help you to manage your expenses and savings. Remember to take any credit if you have the capacity to repay it. Use the above tricks to maintain and grow your scores and lead towards a financially stable life.