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How to Improve One's CIBIL Score?



A bad CIBIL score means it is difficult to obtain a loan when you need it the most. You need to take measures to improve it.

Know your CIBIL score

If you have to improve your CIBIL score then first know it . After your CIBIL score along with the credit report has been mailed to you check and see if your name, age, date of birth, PAN card details are correct. Check and see if the loans mentioned (personal, car or home loan) are really availed by you and their account numbers are correct.

Make your repayments in time

You get a low CIBIL score when you delay the payments on your loans and credit cards. If you have delayed payments in the past make sure to get back on track within 30-60 days as your CIBIL score can increase very fast if this is done. Make your remaining EMI payments in time and never delay your payments beyond 90 days as your credit score stays low for a period up to 2 years.

Making enquiries for new loans

If your CIBIL score is low do not make enquiries with banks/NBFC for a new loan or apply for a new loan. CIBIL maintains a record of all enquiries you make with any bank and updates it in your credit report. Enquiries indicate that you need a loan badly (you are a bad manager of finances) and this lowers your CIBIL score. Pay back your loan (EMI’s) or credit card dues and then make an enquiry or avail a new loan.

Secured loan vs unsecured loan



If you have a personal loan or avail too many credit cards your CIBIL score remains low as these are unsecured (no collateral is required). Try to pay back these loans as soon as possible and if further loans are needed take a loan secured against your property.

A secured loan increases your CIBIL score as collateral (property) can be seized by the bank if you default on your loan. This raises your CIBIL score.

Over utilizing your credit limits

When you avail a credit card you are given a credit limit(amount you can spend on your credit card) based on your salary and other eligibility criteria. If you are given a credit limit of 2 Lakhs and utilize 90% of this limit you get a low CIBIL score as even though the payments are made in time, banks believe that you require excess credit (loans) as your finances are not well managed. Try to utilize only 40-50% of the available credit limit on your card and your CIBIL score will increase.

Do not stand a Guarantor for a loan

Never stand guarantor for a loan of your friends or relatives as even if your score is good and they default your CIBIL score will go down.

Increase the duration of your repayment history

If you have taken a loan and have been repaying it in time for the past six months you get a decent CIBIL score. If you make the payments on the loan promptly for 5-6 years your CIBIL score increases. You have to be patient as a good CIBIL score takes time to obtain.

Do not close old credit cards

Your CIBIL score improves if you make prompt payments on your loans and credit cards over a long time period. If you have made your repayments in time on your old credit cards do not close them. They represent a good credit history and your CIBIL score goes up.

Do not avail a new credit card unless absolutely necessary and continue using the old credit card as it already has a good credit history and further prompt payments improve your credit score. A new credit card means you need to start making your repayments over a period of time (say a year) in order to get a sufficient credit history.

Hire a firm which specializes in credit improvement

There are firms which specialize in helping you improve your credit score for a fee. You don’t have to spend time trying to improve your credit score. These firms analyze your credit report and suggest methods which you need to follow in order to attain a good CIBIL score.

It is good to take help from a credit improvement firm as you learn the methods they employ to improve your CIBIL score and then you can do it yourself.

Should you go for a settlement of your loan?

If you fall behind in your payments regularly banks offer you a settlement where you pay off part of the loan and the loan is settled. Your credit report shows a “Settled” status which means that you have not paid back your loans in full and you cannot avail loans from banks/NBFC for a period of 7 years. Do not opt for a settlement even if you fall behind in payments as this permanently damages your credit score.

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