5 ways to boost your CIBIL Score and maintain credit health efficiently

A good credit score is more than just a metric by which lenders gauge your creditworthiness. It is a key component of your financial profile, and it indicates whether or not you have a healthy credit profile. Your CIBIL Score is one type of credit score, and it is one that lenders check before approving credit applications. Based on this assessment, lenders will decide the terms to offer, and applicants with a high CIBIL Score generally get favourable terms.

 In India, the borrower’s credit behaviour is recorded by TransUnion CIBIL and this agency assigns the score. Your CIBIL Score is a three-digit number, and ranges between 300 and 900. Generally, a score of 750 is preferred by credit lending agencies, as it indicates a low-risk profile. To avail the various benefits on offer, it is important to have a high credit score. Read on to know a few ways in which you can maintain a good CIBIL Score and a creditworthy profile.

Plan to ensure a good repayment record

Late payments on your credit card dues or your loan EMIs will negatively affect your CIBIL Score. Moreover, they get recorded in your history, and other lenders can view these defaults, and see you as a risky borrower. To avoid this, you must plan and budget accordingly. A good way to start is to ensure that EMIs and payments fit within your budget. Secondly, ensure that your payment accounts have sufficient funds so that automated payments can happen without any issues.

 Another option is to set reminders and verify that everything is in order before the payable dates. This way you won’t miss your due dates and can avoid defaults on your credit report. Finally, you can also try to prepay your outstanding amount every few months, and reduce the balance. This way you can easily repay all bills on time and establish a repayment record that boosts your CIBIL Score.

 Have the optimal credit utilisation ratio

The credit utilisation ratio is the amount of credit you use based on the total credit assigned to you. This usually accounts for all credit cards assigned to your profile. Ideally, the optimal credit utilisation ratio is 30%, wherein you do no use more than 30% of the total credit assigned to you.

The benefit of this is two-fold, as it not only helps you build and maintain your credit score, but also keep your debt-to-income ratio low. This helps ensure that credit payments never exceed your capabilities, and thus minimises your chances of defaulting. A low debt-to-income ratio is a goof way to keep your CIBIL Score from dipping. Moreover, from a lender’s POV, applicants with a low debt-to-income ratio have a lower risk profile, and thus qualify for credit easily.  

 Maintain your old credit cards

If you have an old credit card with a long repayment history and good track record, using it can help you improve your CIBIL Score. Moreover, closing an old credit card can reduce the length of your credit history, and this hurts your credit score. So, if you are looking to improve your CIBIL Score, maintain your oldest active credit accounts well.

Do not make multiple credit applications

Filling multiple credit applications over a short span of time can impact your credit score negatively. These are recorded as hard enquiries, and lenders view this as credit-hungry behaviour. Ideally, you should apply for new credit only if you absolutely need funds, and wait at least a few months between applications. This allows for ample time to improve your score and thus your eligibility.

Fix errors in your credit report

Reporting errors in your credit history can cause a dip in your CIBIL Score. These incorrect entries can be particularly damaging if they pertain to closed credit accounts. For instance, if you have closed an account, and it has not been reported by the lender, you could be marked as a defaulter. This will lower your score, and the impact will get worse the longer this error persists. As such, it is important to raise disputes and ensure that the errors are fixed to maintain a clean track record.

Utilise these ways and focus on improving your CIBIL Score effectively over time. Note that the credit score is not the sole factor that determines approval of your application. However, it is one of the primary criteria for availing new credit. To keep track of your credit profile, you can visit the Bajaj Finserv website and check your CIBIL Score for free. Get a customised Credit Health Report and work towards developing an excellent CIBIL Score. With a strong profile, you can qualify for exclusive credit deals and fund expenses affordably.

Published on: Monday, September 19, 2022, 01:47 PM IST