Cibil Score can tell a lot about a person’s credit journey. If you have a bad credit score, chances are you’ll face problems in the process of availing loan. And even if you find lenders, interest rates will be comparatively high.
You can think that increasing your Cibil Score is a key to unlock a healthy credit journey. Plus it gives a plus point if you want to avail long term loans like Home Loans, Car Loans, mortgages etc.
A CIBIL score is a working report of your credit behaviour where you can understand a person’s spending habits by looking at their credit score.Companies usually make their lending decisions by looking into the person’s credit score. Major credit bureaus in India, like Experian, Equifax, TransUnion CIBIL, and CRIF High Mark, provide credit scores to each person by analysing your credit transactions, including payment history, amount of debt you have, and length of your credit history.
A higher score shows the responsible credit behaviour of an individual. Eventually, it helps you to get better interest rates while requesting a loan from potential lenders and creditors.
Step by step guide to Build a Healthy Credit Score
Given the importance of Credit Score in your credit journey, it becomes important to understand how to increase credit score. Let’s look into the steps one by one:
- Never miss your payments.
- Maintain your credit card utilisation ratio below 30%. Only during emergencies use a credit card, rather than using it for every payment.
- Get a mixed variety of credits like secured and unsecured loans.
- Don’t apply for multiple loans in a short time limit. First, research and compare, then choose the one that suits you.
- Stay active with regular borrowings and transactions in your credit. Check credit reports periodically to know the happenings in your history.
- Even if you choose a long-term and small EMI, you can pay your dues more than the maximum or can do prepayment to avoid more interest from piling up.
- You can manage your credit score with score builder loans, which are exclusively designed for new credit users with no credit history.
How to stop your CIBIL Score from going down?
- A high CIBIL score is a plus point for everyone who prefers loans and credit cards. Particular things could lower your CIBIL score if you don’t maintain it properly.
- Maintain your credit utilisation ratio below 30%. By avoiding unnecessary expenses, you can save yourself from the struggles of monthly dues. Because one missed due can create havoc in your credit history. If you wonder how to increase your cibil score from 600 to 750, advice would be to take a break on your purchases.
- Only when you need extra financial support, then only go for a loan. Likewise, multiple loans from different lenders will negatively impact your CIBIL score. Because whenever you apply for a loan, the lender will make a hard inquiry over your credit to decide your eligibility. So with more loans, more hard inquiries will follow, which is unsuitable for your CIBIL score.
- Most importantly, if you opt for a loan and cannot repay them properly on time, it will eventually lower your CIBIL score.
A CIBIL score mirrors your creditworthiness in the eyes of Banks and Non-Banking Financial Institutes, plus it will help you to avail long term loans with better interest rates. CIBIL score does not improve with the speed you may desire, but with constant effort and planned credit, you can achieve the desired result.