9 Best Practices to Improve Your Credit Score

There is a common misconception that people who don’t have sufficient financial resources apply for a loan. Using and managing debt smartly can help you achieve your financial needs and goals. However, you must behave responsibly towards credit management. A disciplined approach towards taking and repaying credit will make sure that you always enjoy a good credit score.

Some lenders are willing to lend to borrowers who need a loan but have a low credit score. However, in such cases, the interest rate is higher and the loan amount is lower. In addition to this, some lenders may grant a loan without a credit score too. Borrowers without a CIBIL report are those who do not yet have a credit history or whose credit history is less than six months. You can easily access your CIBIL Report and check your CIBIL score online.

Credit Score Classification

The credit score, derived after a credit score calculation, is the first point of review when a person applies for a personal loan. Given below is the general classification of credit score:

CIBIL Score Range

CIBIL Score RangeRating

300-499Poor

500-649Average

650-749Good

750-900Excellent

9 Ways to help you Improve your Credit Score

There’s no denying that your credit score calculation has a direct bearing on your loan application. You need a healthy credit history to achieve your financial goals without any hiccups. If for some reason, your credit history hasn’t been good or you have defaulted on loan repayments, your credit rating takes a hit. In the future, applying for loans might get difficult with a low credit score. On the bright side, there are ways toimprove your credit score.

• Make timely payments: The importance of clearing your dues on time cannot be overstated. This will not only help in improving your credit score calculation but also helps in avoiding high interest on late or missed payments. You can either set reminders for bill payment dates or switch to auto-payment mode.

• Clear Pending Dues: Have a clear strategy of paying off high-interest loans/ credit card dues first. You can contact your lender for debt repayment options. You can also go for a loan settlement option for some of your loans. Your credit score will take a temporary hit but you can start afresh for increasing the same.

• Increase your credit score through a Personal Loan: Applying for a small personal loan can help you improve your CIBIL score. The lender may be more inclined to grant the loan as its risk is reduced due to the small loan amount. Moreover, repaying a lower personal loan amount will be easier on you. Your CIBIL score improves with the timely repayments of the personal loan.

• Check Your CIBIL Report: Your CIBIL report derives its information from various lenders and banks. It is important to check your credit report periodically and report any discrepancies to CIBIL. Chances are your latest credit history details haven’t been updated with CIBIL and thus have negatively impacted your loan credit score and credit report.

• Improve your Credit Mix: When you have availed of several loans and if the number of high-risk unsecured loans is more than secured loans, it is considered a poor credit mix. Rebalancing secured and unsecured loans can help improve the CIBIL score.

• Avoid Becoming a Co-Applicant or Guarantor: If the primary applicant defaults on a loan, as a co-applicant or guarantor, it will reflect badly on your credit rating too.

• Improve Credit Utilization: Practise responsible credit management by avoiding stretching out your credit limit. Say, for credit cards the credit utilization should not exceed 30% of your credit limit.

• Avoid Multiple Loans: Multiple credit inquiries or loan applications within a recent period may imply that you have insufficient funds to repay older loans. It is a good practice to repay the current loan before taking another one to keep your credit score from getting low.

• Get Your Credit Limit Increased: Based on the credit behavior of its borrowers, lenders may offer an increased credit limit. It is advisable to accept the offer if you are a responsible borrower. The idea is to have a lot more credit but keep your utilization low to help improve your CIBIL score.

How to Check your CIBIL Online?

On the official CIBIL website, you can check your CIBIL score online and also download your free credit report. Many other sites also publish CIBIL details but there might be a fee involved.