A credit score (CIBIL Score) is very important for availing of loans from banks. A good CIBIL score not only helps to get a loan easily but at a better interest rate.
CIBIL is one of the four credit bureaus in India that generates reports based on your credit history. Here are some tips to improve your CIBIL Score and to keep your credit score healthy.
What is a CIBIL score?
CIBLE stands for the Credit Information Bureau (India) Limited (CIBIL).
Reserve Bank of India (RBI) has given licenses to 4 companies for generating and maintaining credit information. These Companies are: –
- Credit Information Bureau (India) Limited (CIBIL)
The most popular of the above companies is CIBIL.
CIBIL Limited maintains the credit information of 600 million individuals and 32 million businesses. CIBIL India is part of TransUnion, an American multinational group. Its credit scores are known in India as the CIBIL Trans-union score.
CIBIL Score is a 3-digit numeric summary of your credit history, rating, and report and ranges from 300 to 900. Higher the score, the better your credit rating is.
How to check your CIBIL score?
There are several ways to check your CIBIL score. One such method is by using our online banking dashboard.
There are many mobile payment and finance management application forms to directly check your CIBIL score, such as Paytm, wishfin, etc.
You can directly go to the website of CIBLE to check your credit score. https://www.cibil.com/freecibilscore
Why is a good CIBIL score important?
Credit scores determine the likelihood we’ll be approved for new credit. A low credit score can lead to difficulty buying a car or getting a mortgage loan. Low scores can also mean high interest rates on loans and higher insurance premiums. The best way to ensure you’re not tripping over frustrating roadblocks is to manage your credit health regularly.
A good credit score can be essential for many aspects of life. It will help you get approved for a loan, get a better interest rate on your loans, and it can even determine what your insurance rates are. If you have a good credit score, you can save a great deal of money. Conversely, if your credit score is low, the interest rates on your loans will be significantly higher, and you can be denied loans altogether.
According to our financial sector sources, a CIBIL score can get you more than 10 percent higher loan eligibility, more than 50 percent higher loan eligibility for housing loans, and more than 70 percent higher loan eligibility for personal loans.
What is a Good Credit Score?
A CIBIL score is given between 300 points to 900 points. Higher is your credit score; better is your credit health.
A CIBIL score range can be summarized as follows:-
|CIBIL score range||Your CREDIT HEALTH|
|300-549||Poor CIBIL score, Irregular repayment behavior, high risk of turning a defaulter|
|550-649||Fair CIBIL score, late payment of credit card bills/EMIs, Multiple credit inquiries|
|650-749||Good CIBIL score, Responsible repayment behavior, long credit history, low risk of turning a defaulter|
|750-900||Excellent CIBIL score, No defaulted payments, Timely payment of bills, No unpaid dues, Clean credit report.|
Top Reason for Low CIBIL Score
- Multiple Credit/Loan Enquiry
- Payment of Minimum Due on Credit card leading credit card outstanding balance.
- Holding too many Credits Card
- Aveling too many loans
- High Credit Usage i.e., more than 30% of the sanctioned limit
- Late payment of credit card dues
- Missing Instalments of loan
- Skipping payment of credit card due to Transaction dispute.
- Rejection of Credit Card or Loan Application.
How to Improve CIBIL Score Immediately: Top 10 tips
To improve your CIBIL Score, follow the tips provided below:-
1. Check Your Credit Score regularly-
There is a misconception that checking credit score too many times will impact your CIBIL score negatively. But be assured that checking CIBIl score regularly will not impact credit score negatively. By checking your credit score at a regular interval, you can be aware of factors affecting your credit score and improve your score.
You can check your credit score on a monthly or quarterly basis.
Errors in Credit Report should be Corrected
It would be best if you disputed all errors immediately by visiting the official website, www.CIBIL.com. Once you review your CIBIL report, you can determine the transaction you disagree with or identify the error.
2. Consider cancelling your credit card, not in use-
Do not hold an excess number of credit cards as it will impact your credit cards. Instead, consider canceling your credit card, which you do not require. It is not advisable to hold more than 3-4 Credit cards. Once you have canceled the card, go back to the CIBIL, and you can see change your score.
3. Try to get Higher Credit Limit
Instead of holding several different credit cards, try to get a higher credit limit on a single card.
4. Maintain Healthy Credit Utilization Ratio
Always maintain a healthy credit utilization ratio on your credit card. A credit utilization ratio of less than 30% is considered good and will positively impact your CIBIL Score.
E.g., if your sanctioned credit limit on your Card is ₹500,000 than do not utilize it for more than ₹150,000
5. Pay your Full Credit Card Dues on Time
Paying outstanding credit bills dues on time can help in improving your credit score.
The cardholder made a common mistake by paying the minimum due amount on Credit card bills, generally 5% of total dues.
Paying minimum dues will avoid penalty from the Card issuer and will lead to heavy interest on the balance amount and impact your CIBIL score adversely.
Thus you should pay your full credit card bills on time to improve your credit score.
6. Do Not Miss your Loan EMI
In today’s world, one has to avail of various loans like a Vehicle loan, House loan, Personal loan, etc. To fulfill loan obligations, you have to pay EMI(Equated Monthly Instalment).
To improve your CIBIL score and maintain a good credit history, don’t miss a payment of loan EMI on time.
7. Don’t apply to Multiple Banks for Loan
There is a common tendency to submit a loan application to multiple sources so you can get the best deal.
But this tendency will damage your credit history. So before applying for a loan, check the interest rate and charges of different banks and submit a loan application to only one bank which suits you most.
8. Don’t Go for Debt Settlement
Avoid debt settlement at any cost if you want to maintain a good credit score.
If you opt for debt settlement, you are most likely to face the rejection of fresh loan applications.
10. Pay long-standing loans dues.
There is a possibility that a small amount of loan or any charges may remain outstanding and get unnoticed. These amounts of loans or charges are so small that the bank does not demand them. This will lead to an unsettled loan account. Pay such an amount and apply to rectify your Credit Score.
Try to make a good credit history by persistently following the above tips for a long period.
A CIBIL score is reliable data that helps evaluate the risk level of a credit card holder, a borrower, or a lending institution.
Always maintain a credit score (CIBIL) at least above 700 to get a loan easily on better terms.
Old but gold advice-Tip for personal Finance Management– “Always control Your Credit Hunger.”
FAQ (Frequently Asked Questions)
Q.1 How is CIBIL Score Calculated?
Ans. CIBIL score is calculated considering various factors such as Credit history, Repayment history, Loan amount, Credit applications made, credit mix used, etc.
Q.2 What is the minimum CIBIL score for securing a loan.
Ans. A minimum CIBIL score for getting a loan is 700, but it may differ from financial institution to institution. For example, some NBFC and small banks may accept a lower CIBIL score.
Q.3 Can I improve my credit score in one month?
Ans. Yes, you can improve your CIBIL score to some points by paying your outstanding debts and total credit card bill, which will lead to less credit utilization and improve your credit score.
Q.4 How much time will be required to get an excellent CIBIL score.
Ans. If you regularly follow all of the tips provided above, you can boost your credit score within 6 to 12 months.
Q.5 Will an unsecured loan, such as a personal loan will affect my CIBIL Score?
Ans. Personal Loans are unsecured and carry a higher interest rate. Therefore, if you utilize several personal loans, it will negatively affect your CIBIL score.
Q.6 What are the charges for checking the CIBIL score?
Ans. CIBIL charges a nominal sum for their services. The CIBIL score charges for different plans are explained below:
- One Report: Avail of a copy of the CIBIL report and credit score free of cost once a year.
- One-Time Report: Other than above The CIBIL score charge for a one-time report is a nominal sum of Rs. 550.
- Standard: The CIBIL charge for a standard subscription is Rs. 800. This subscription enables you to receive 2 reports over 6 months.
- Premium: The CIBIL charge for a premium subscription that enables you to receive 4 detailed reports over a tenure of one year is Rs. 1200.
But most banks and payment mobile applications let their customer get CIBIL scores free of cost on a monthly/Quarterly basis.