Want to improve your credit score? Here are some tips

When assessing your credit eligibility, CIBIL score is one of the most important factors that lenders check on. Credit score ranges from 300 to 900 with 300 being the lowest and 900 the highest. The score signifies your credit history, reflecting your repayment behavior that helps lenders get a fair idea to decide on the status of your application.

A low credit score is a sign of bad financial behavior that can lead to rejection or approval of the loan at a low interest rate. To be able to get quick access to funds, having a good credit score is essential. Read to know how you can increase your CIBIL score.

Pay off your loan EMIs on time

If you have taken a loan, i.e. secured or unsecured one, ensure that you don’t miss out of any of the EMI payments as it can hurt your credit score, thereby making it difficult for you to secure more loans in future. If you are unable to pay off your loan EMIs, then it is best that you approach a lender to restructure your EMI and pay off the debt.

Don’t make too many credit applications: If your credit card or personal loan application has been rejected, then remember the same will get recorded in your credit report. So, if you go and apply with another lender, they may also reject your loan application on the basis of the low score. Hence, the best thing you can do is wait and re-apply after a span of 2-3months.

Pay your credit card bills on time

Paying off credit card bills on time is a sign of good credit behavior and helps you in improving the score. Ensure that you don’t pay only the minimum dues but pay off the entire due amount.

Avoid taking too much debt at a time

The number of loans that you hold has a great impact on your credit score. Taking multiple loans shows that you are unable to manage your finances and further decreases the score. On the other hand, if you are able to pay off the loan EMIs on time, then it can boost your score.

Monitor your credit utilization ratio

Using a credit card to make purchases may help you get cash back and win reward points, but it is essential that you keep the credit utilization only within 30 percent of your credit limit. Doing this can help you improve the credit score and give lenders a sense of assurance that you are not dependent on credit cards for making all the purchases.

Ensure you maintain a mixed bag of credit

There are two types of loans you can opt for---secured and unsecured loan. Taking too many unsecured loans has a negative impact on your score, whereas opting for secured loans like home or car loans can in fact help you increase the score.

Check for errors in your credit report

It is important to note that your financial transactions may not be the only reason for a low credit score. There may be errors in your credit report as well, due to which it is imperative that you regularly keep checking the same. Note the incorrect information present in your credit report and report the same to CIBIL authority to rectify the errors and update the report with correct details.

Opt for longer loan tenure

When availing a loan, opt for longer repayment tenure, as it will ensure you get minimal EMI to pay each month and you would be comfortable to make timely repayments. Your credit score improves if you don’t delay, default or skip your EMI payments.

Avoid credit card closure

The age of your credit history matters. If you have an old credit card towards which you have maintained a good credit behavior, then avoid closing the credit card. Remember, the longer the credit history, the better your credit score and that indirectly increases the chances of getting your loan or credit card application approved.

Set up payment reminders

Set up your EMI dates and credit card payment dates in your calendar to pay-off the same on time and to avoid making any default. Being consistent with your payments will help you improve your CIBIL score.

Monitor your guarantor, co-signed and joint accounts

If the primary account holder defaults on his/her loan, then you will be held responsible to pay-off the dues. Your joint account holder’s negligence can affect your credit score, and you will be denied access to the same as and when you need it. Also, you will have to clear the dues if the primary account holder is unable to do so. Therefore, it is best to avoid becoming a co-signer, guarantor or joint account holder for any type of loan or credit card.

Increase your credit card limit

This does not mean that an increased credit card limit increases your spending cycle. The trick here is that this can help you improve your CIBIL score. Increasing the credit limit will help you keep your utilization low and by doing that you leave a positive impact on your score.

Following the above tips can help you improve your credit score. However, it is important to note that your score cannot be improved overnight and will take around 3-6 months for you to practice good financial behavior. By working towards improving your credit score, you open up a whole new world of opportunities for you as it helps you to get quick access to credit card funds, quick loan approval, low interest rates and high loan amount.

(Viral Bhatt is Founder of Money Mantra — a personal solutions firm)