Few right moves and you can improve your credit score real fast.
Photographs: *vlad*/Creative Commons
Every lender has different parameters to issue a particular loan amount. The Reserve Bank of India has mandated that all banks should check the CIBIL score of every loan/credit card applicant at the time of evaluation.
Your CIBIL report keeps a track of your past repayment on loans and credit cards. Lenders consider your past behaviour along with your present actions to determine your repayment intent in the future.
If you have a bad CIBIL score, here are few right moves that will improve your credit score real fast.
CIBIL Score on the CIBIL report is more like a report card for grown-ups, where, the marks range between 300 and 900. The more you score, the better you attract potential lenders and get good loan deals.
If you see bad score on your report, then we suggest few easy steps to push your CIBIL score in the right direction that will improve your credit worthiness.
Eradicate the balances
Firstly, eliminate those credit card balances. Only spend as much as you can repay within the billing date. By balances, we also mean any unpaid dues on loans. Talk to your bank and negotiate to close your loan account by paying off any unpaid dues.
Such unpaid dues or heavy balances on credit cards pull your score down. Paying off this amount will positively reflect on your CIBIL score. Also, it is better to have just one or two credit cards; it becomes easier to keep track of repayment.
Dispute inaccuracies
Make sure that you dispute errors immediately on www.CIBIL.com after reviewing your CIBIL report or if you disagree with a particular transaction made through the vendor. Mistakes happen; lenders can also make errors at the time of data entry.
It is compulsory for any financial institution to act on those disputes within 30 days. Once the error is resolved, it will show improvement in your score. Do not apply for new credit without resolving old issues.
Keep the oldest credit card account
Many of us believe that credit card accounts that we are not using any more should be closed. Obviously, we do not know the impact it has on our CIBIL report and score.
In reality, a good credit card account that you have managed well with timely payment is a boon. It gives the much-needed longevity to your CIBIL score, which is one of the factors that lenders consider while evaluating your application.
Keep the good account as long as you can, by not closing them when you have a solid repayment history.
Pay EMIs on time
If you are intending to make a big purchase like a car or home, ensure that you are not behind in repaying your credit card bills and EMIs. Instead pay them on time. This is one of the important things that CIBIL looks into while gauging your credit rate.
Even if you have huge savings, a drop in CIBIL score can shatter your dream of owning a house or a car. Timely payment of bills can keep your creditworthiness intact.
Keep an eye on your credit utilisation ratio
Do not use your credit card for everything. It is better to keep your credit utilisation ratio up to 30 per cent or lesser. By doing this, there will be a positive impact on CIBIL score. Keeping your monthly balances low will reflect a healthy CIBIL score.
Increase your credit limit
When you ask your bank to raise your credit limit, it does not necessarily mean that you get a chance to spend beyond your means. This hike can have number of plus points, if you manage your credit wisely.
It simply means that you have a lot more credit available at your disposal, and if you keep your credit utilisation low, it will have a positive impact on your CIBIL score. That said, please ensure you don’t spend beyond your repayment capacity.
Get a secured card
Do you have a very bad CIBIL score to get a credit card? Then try getting a secured credit card. Leading banks such as ICICI Bank, Citibank, SBI, DCB Bank, Axis Bank etc. offer a secured credit card against a fixed deposit of nominal amount. If you repay your balances on time, it will give your CIBIL score a shot in the arm.
By following these smart tips, you can improve your CIBIL score.
A high CIBIL score indicates that one has disciplined spending and repayment habits. Thus, the banks, financial institutions, the credit card companies will offer you a higher credit limit with better terms and conditions.
The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.
