Your CIBIL score is vital for your loan applications, as many lending institutions use it to determine your creditworthiness.
A high CIBIL score can help you get lower interest rates on your loans and allows you to get the best home loan rates, while a low score could mean that you get turned down for credit cards or other loans; therefore, it is essential to follow some tips to improve your CIBIL score.
There are eight simple tips to improve your CIBIL score quickly and easily:
1. Review Your Credit Cards
At least once a year, log in to all of your credit card accounts and review your most recent transactions. If you notice anything suspicious, such as duplicate charges or charges from a store you didn’t visit; contact your credit card company immediately to report fraud. Be sure to keep an eye on your balances; if they start creeping up higher than what you can comfortably afford, it might be time to cancel some cards.
2. Try Maintaining a Healthy Credit Mix
You may be so focused on what you owe and how to pay off the debt that you’re ignoring another significant component of your credit score: your credit mix. When it comes to earning points toward a good credit score, it’s essential to have a healthy amount for each type of account and maintain those accounts for at least 12 months.
3. Don’t Open Multiple Lines of Credit Too Fast
A common mistake is to open up multiple lines of credit in a short period, which can hurt your score. If you decide to apply for several different cards at once, make sure you do it after giving yourself some time between applications (so you don’t rack up too many inquiries on your credit report). Avoid applying for multiple forms of unsecured credit (like cards or personal loans) at the same time, as it demonstrates credit-hungry behavior.
4. Close Inactive Accounts
If you’re planning to apply for a new loan, mortgage, or credit card, you should keep your number of open lines of credit to a minimum. Close inactive accounts that you don’t use regularly. The more cards you have, especially those with high balances, the less attractive you are to lending institutions. So if you have not used any old cards in years, consider closing them—you can always reopen them later if necessary.
5. Check Your Credit Report Regularly
Knowing what is on your credit report and how it affects your credit score is crucial to improving your score. Check it once a year to ensure no incorrect or outdated information has slipped through, and dispute any errors you find immediately. Remember that creditors are required by law to respond within 30 days, so be patient if they don’t get back to you immediately. If your dispute isn’t resolved after 60 days, contact another creditor or consumer protection agency for help resolving it.
6. Pay Bills On Time
If you don’t have a history of paying your bills on time, you might find it tough to get a credit card and get the best home loan rates in the future. Moreover, if there is a delay in your payments to any lending institution, your rating will automatically drop. So, keep up to date with all your payments on time. The late fee that may be charged for non-payment should be paid as soon as possible. You can avoid further delays and save yourself from additional charges. You can also check your monthly statements carefully to ensure no mistakes are made while processing payment details. By doing so, you can avoid unnecessary penalties and charges from lending institutions.
7. Avoid Over-Utilization Of Credit Cards
The more credit cards you have, or even if you have a higher limit on existing cards, your score can go down. Only use about 30% of your total credit card limit, and be sure to use different lines of credit when possible. If you are in danger of maxing out multiple cards, it’s time to consider paying them off or closing at least one card.
8. Don’t Ignore Credit Card Offers
Shunning credit card offers may seem like an intelligent thing to do, but banks don’t like it when you do. It’s called anti-churning, and it could lead to a decrease in your credit score. The most significant benefit of having at least one open account is that your available credit isn’t being penalized. If you have no accounts open, all your available credit is considered used up. It means less room for borrowing and higher interest rates for those loans. So keep an eye out for those pre-approved offers—you can always say no if they aren’t suitable!
As you may know, your CIBIL score affects the interest rates that lending institutions offer you on loans and other financing options, so keeping it as high as possible can make a big difference to your bottom line when you apply for credit products and also allows you get some of the best home loan rates. Depending on your credit profile, lending institutions may not even offer you financing if your CIBIL score is too low. That’s why it’s essential to work on improving it by following the above-mentioned 8 simple tips to improve your CIBIL score.