Imagine the scenario: You walk into your local bank or visit an online financial institution, such as TATA Capital, ready to apply for a loan. You have your documents, your identification and everything in order, but then the dreaded word appears – CIBIL score. It falls just short of the preferred range, sitting at 600, and suddenly, your financial plans are on hold. If this scenario seems familiar, it's time to learn how to increase CIBIL score from 600 to 750.
Understanding the CIBIL Score
Before one can embark on the journey of how to improve their CIBIL score, it is pivotal to comprehend what it stands for. The Credit Information Bureau (India) Limited (CIBIL) score is a three-digit number that indicates an individual's creditworthiness. The score ranges from 300 to 900, with the higher end of the spectrum reflecting a stronger credit profile.
A score of 750 and above is considered excellent and often ensures a smooth loan or credit card application process. A low score, on the other hand, can pose challenges in securing loans or credit cards, thus making the quest to improve one's CIBIL score a critical concern for many individuals.
How Does the CIBIL Score Work?
The Cibil score is calculated based on the information in one's credit report, which is a record of their credit history. This information includes data on the types of credit they have (credit cards, loans, etc.), their payment history, the amount of debt they have and their credit utilisation ratio, among other factors.
Payment History: One's repayment behaviour plays a crucial role in determining their Cibil score. Regularly paying off the credit dues indicates responsible credit behaviour, which in turn improves one's score. Conversely, late payments, defaults and settlements can harm one's chances of landing a better mark on how to improve cibil score after settlement.
Credit Utilisation: This refers to the ratio of one's credit usage to their credit limit. A high credit utilisation ratio may imply dependency on credit, which can negatively impact their score. It is recommended to maintain a ratio of 30% or less.
Credit Mix and Duration: The type of credit (secured and unsecured) and the duration of one's credit history also factor into their Cibil score. A balanced mix of secured (such as home loans) and unsecured loans (such as credit cards) and a longer credit history can enhance one's score.
Credit Enquiries: Each time one applies for a new line of credit, a 'hard enquiry' is made, which can temporarily lower their Cibil score. Hence, too many credit applications within a short period can negatively affect your score.
Public Records: Records such as bankruptcies and tax liens can severely harm one's Cibil score.
Understanding these factors can provide clear insights into how to improve one's Cibil score. By managing these aspects of one's financial behaviour, one can begin to work towards enhancing their creditworthiness.
How to Increase Cibil Score?
Timely Bill Payments
Paying one's bills on time is the cornerstone of a healthy credit profile. This is more than just meeting the deadline for one's credit card payments; it extends to all forms of bills that might be associated with their name. These can include household utility bills, loan EMIs and even mobile phone bills. Each missed payment is a mark against their credit health, lowering their Cibil score. When contemplating how to improve cibil score immediately, it is essential to prioritise timely bill payments. Automating payments or setting reminders can be beneficial strategies to ensure not to miss a deadline.
Lower Credit Utilisation
Credit utilisation refers to the proportion of one's available credit that they are currently using. If one is regularly nearing their credit limit, it can be an indicator to lenders that they are heavily reliant on credit, which can negatively impact their Cibil score. If you're exploring how to increase your Cibil score, aim to maintain a credit utilisation ratio of no more than 30% of your available credit limit. This indicates to lenders that you're using credit responsibly and not living beyond your means.
Eliminating Debt
Debt can be a significant factor in determining one's Cibil score. The more debt one has, the more it can decrease their score. It's not uncommon for individuals to wonder how to improve their cibil score after settlement. The answer lies in eliminating their outstanding debt. Regular payments towards their debt, coupled with strategies to reduce the total debt amount, can gradually improve their Cibil score. Debt consolidation loans, for instance, can be a viable option to manage high-interest debt effectively.
Diversifying Credit
Another aspect of understanding how to increase one's Cibil score is diversifying their credit. A mix of secured loans (such as home loans and car loans) and unsecured loans (such as credit cards and personal loans) can positively impact their Cibil score. Lenders view this credit mix as an indication of responsible credit management. It suggests that they can handle different types of credit products and that they are more likely to handle repayments responsibly.
Regular Monitoring
In the journey of increasing one's Cibil score, regular monitoring is a crucial but often overlooked step. Regular checks of your Cibil score and report help you understand your credit standing, track your progress and identify any inaccuracies or fraudulent activities in the credit report. Errors in the credit report can pull down your score; hence, it's essential to get them rectified to get a better hit on how to improve cibil score immediately. Monitoring services provide timely updates and can be a valuable tool in understanding how to increase your Cibil score.
Conclusion
In conclusion, mastering the art of improving your Cibil score unlocks a world of financial opportunities, from securing a mortgage to achieving lower interest rates on loans. This journey, though demanding, is a worthwhile investment in your financial health. As you embark on this mission, remember, every step you take towards improving your Cibil score brings you one step closer to your financial dreams.
Ready to reap the rewards of your improved Cibil score? Explore TATA Capital's diverse range of financial products today. With offerings tailored to every need, TATA Capital is the ally you need on your path to financial success. Start your journey with us now.
04 March 2024
6 mins read
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