A CIBIL score is a 3 digit score which helps to determine your credit history and ranges from 300 to 900. A CIBIL score of 750 or higher is considered excellent by the majority of lenders. Your CIBIL score should be closer to 900 if you wish to have easier access to financing. Lenders such as banks and NBFCs prefer to give loans to persons with good credit scores since they are less likely to default.
The Advantages of a High CIBIL score
With a higher CIBIL score, you’ll be in a better position to bargain with lenders for a cheaper loan interest rate. People with a high credit score may qualify for favourable loan interest rates from a number of lenders.
How is your Loan’s Interest Rate Determined?
The interest rate on a home loan or a car loan varies by bank, but if you have a good CIBIL score, you may be eligible for a lower rate. Banks will provide you loans at a cheap interest rate if your CIBIL score is 750 or higher. Consumers with a high CIBIL score pay lower borrowing rates, whereas those with a low or poor CIBIL score pay higher interest rates. As a result, it’s critical to maintain a positive credit profile and keep track of your CIBIL score on a regular basis.
What Can you do to Raise your CIBIL score?
If you intend to take out a loan, you should review your CIBIL report to see where you stand. A CIBIL report provides a comprehensive overview of your current and previous credit accounts. Regularly reviewing your CIBIL report will help you figure out where you’re doing wrong. You can increase your CIBIL score by focusing on those topics.
Here are a few basic steps you can take to increase your CIBIL score:
- Your late payments will be resolved
Late payments have the greatest impact on your CIBIL score. Avoid delays by paying all of your credit card bills and EMIs on time.
- Keep your credit exposure to a minimum.
According to experts, you should only use 15-30% of your credit card limit at any given time. Using your credit limit to its maximum capacity indicates that you are credit-hungry and incapable of managing your finances.
- Correct any mistakes in your report
If your CIBIL score has dropped suddenly, you should double-check your credit record for any mistakes. Correcting inaccuracies in your CIBIL report as soon as possible will help you enhance your score.
- Increase your credit card’s credit limit
Requesting an increase in your credit limit on your credit card is one of the quickest ways to improve your CIBIL score. You should maintain your credit use low once your credit limit has been increased. This will indicate that you are not credit-hungry and can manage credit.
- A good blend of credit
It will help you raise your CIBIL score if you have a decent balance of secured and unsecured credit. It is preferable to have one or two credit cards, as opposed to taking out an unsecured loan. Having a car loan, on the other hand, will be beneficial because it is a secured loan.
- Multiple credit queries should be avoided
Making multiple credit queries at the same time has the potential to lower your CIBIL score. It’s a good idea to spread out your questions across time. When you apply for credit at the same moment, you risk triggering hard inquiries, which might lower your CIBIL score.
- Old credit accounts should not be closed
Your CIBIL score will improve if you have a long credit history. As a result, if you have old credit cards with a strong credit history, you should keep them open. You lose good credit history when you close your credit cards, which can hurt your CIBIL score. It is recommended that you keep your credit cards active for as long as possible in order to preserve a good CIBIL score.
It’s worth noting that if your CIBIL score isn’t close to 750, you should hold off on asking for a loan for a while. You can put off taking out a loan while you focus on improving your CIBIL score to get it closer to 900. You should pay off all outstanding debts and ensure that there are no outstanding dues. Your CIBIL score will improve dramatically if you have a clean credit report free of late payments or defaults. Late payments remain on your credit report for seven years, but their impact diminishes over time.
Also, whenever you’re ready to apply for a loan, make sure you do your homework and shop around for the greatest prices by contacting many banks.