A credit score is a 3-digit number ranging from 300 to 900. Every individual who has availed a credit (loan or credit card) at a point of time will have a score.
Before learning how to improve your CIBIL score, you have to know everything about the score itself.
What is CIBIL Score? and Who gives this Score?
In India, 4 credit information companies provide the credit score – Equifax, Experian, Highmark, and Credit Information Bureau Limited (CIBIL).
CIBIL has more than 2,400 member financial institutions. Hence, the majority of lenders accept the credit score provided by CIBIL.
How is the Score Calculated?
The credit score is based on various on the Credit Information Report (CIR) by CIBIL. The CIR consists of multiple data of an individual. CIBIL collects these data from the financial institutions that have issued a credit to the particular individual.
A typical CIR includes:
- An individual’s personal information.
- Type of credit availed (loan or credit card).
- Size of loan availed.
- Credit card limit sanctioned.
- Outstanding credit balance.
- Overdue amount.
- Days of overdue.
- Settled credits.
- Number of credit enquiries.
- One’s CIBIL score will be high or low depending on some of the factors mentioned above.
What is a Good CIBIL Score?
Now that you know everything about your credit score, you should also know that a good credit score is rated at 750. This score denotes that an individual has managed all of his/her credits responsibly and that he/she is creditworthy for financial advances such as loans.
Lenders consider customers with such a score more creditworthy than the others. Such applicants will also have higher chances of getting their loan application approved quickly.
How to Increase/Improve your CIBIL Score?
You already know what is a good CIBIL score. Here are some tips that will let you know how to improve cibil score. Follow these tips on regular basis, to go for higher cibil score confidently.
Avail a credit card
Credit cards are one of the quickest and ideal ways to improve your credit score. Avail one if you don’t. Also, refrain from closing an old card even if you don’t use it. Only regularly usage of your credit card will help to improve your CIBIL score.
Always pay the total amount due
Your credit card statement comes with a total amount due and minimum amount due. The minimum amount includes a particular percentage of the full; it may also come with interest.
You can pay the minimum amount when you can’t pay the total. However, doing so will lower your CIBIL score. Also, your current full amount due will be carried forward to the next month.
Always pay the total amount due now that you know what is a good CIBIL score.
Keep the credit utilisation low
Refrain from using more than 30% of your credit limit. Going overboard will make you look credit-hungry and lower your score.
Unsecured Credit Cards
Many a time, you may need to have a high credit score to apply for a credit card. In such cases, you can opt for a secured card, which does not require a good score.
Secured credit cards are sanctioned against a fixed deposit. These are exceptional to improve your CIBIL score.
Never make multiple applications
Each application for credit will lead to an enquiry of your credit score and CIR by the lender. Your CIBIL score goes down with every inquiry. Hence, avoid multiple simultaneous applications as it will showcase you as a credit-hungry individual.
Now that you know what is a good CIBIL score, follow these 3 simple tips to improve the same and become more creditworthy.
Pay your debt in time
Paying your loan EMIs and credit card bills in time is one of the ideal ways to improve your CIBIL score.
Furthermore, failure to pay your loan EMIs will attract penal interest. On the other hand, defaulting on credit card debt payment will lead to late fees and charges.
