What is the procedure to increase your credit score from low to high?

Your credit score is an important factor when it comes to your financial life. This is because lenders use this information when you apply for fresh credit, to determine whether to approve your loan or credit card application. Typically, a higher score will yield you the best deals especially in terms of interest rates – which makes it reason enough to ensure that your credit score is consistently high.

If you’re looking to improve CIBIL score and don’t know whom to ask, you’re in the right place! Read on to know more.

What is the credit score?

A three-digit number that represents your credit report, the score is generated by a credit bureau. There are currently four such bureaus in India, of which CIBIL is one. These scores range between 300 and 900, and a score above 750 is considered to be good.

What influences the credit score?

There are several factors that a credit bureau considers when generating your credit score. Let’s take a look at them:

Tips to increase your credit score

Now that we’ve established the importance a credit score holds when it comes to your financial health, let’s discuss the ways by which you can improve your score.

  • Call for your credit report. To begin with, get your free credit score from any of the bureaus. This is a great starting point for you to know where you stand. It’s simple: once you know exactly how good or bad is your credit score, you’ll also be able to understand what it will take to build the score. Further, check the report carefully to ensure that the information therein pertains to you. Any errors need to be highlighted to the concerned bureau immediately, as these can impact your score negatively. It is also a safeguard against identity theft.

  • Make timely payments. If you have an existing credit card or loan, you’ll know what we’re talking about. Given that your payment history is such an important aspect, it is only prudent to make timely payments. Making complete payments is ideal, so that you don’t fall into the debt trap of rolling over payments month on month. If you’re not able to keep track of EMI or card payment due dates, consider setting up an ECS facility from your bank. Sit back and relax while your payments go through seamlessly!

  • Use an existing account well. Do you have a credit card that you possibly no longer use, but have maintained well? By this we mean timely and complete payments. If the answer is yes, we’d advise you to hold on to this account, because it can have a positive impact on your score and in fact help boost the numbers. This is because to a lender, a card that is paid off in a timely manner indicates that the cardholder is likely to be creditworthy. Make an old account count!

  • Don’t apply for cards if you don’t need them. Here’s another golden rule! Every time you apply for fresh credit, be it a card or loan, a hard enquiry is made against your credit report. This brings down your score for a while, which can be fairly damaging. You can also head straight for debt, by getting tempted to overspend since there is credit at hand. It’s best then, to apply for credit only when you absolutely need it.

  • Have a healthy credit mix. A lender looks more favourably at a person who is able to handle all types of debt well, be it a credit card, personal loan or car loan – essentially a mix of both secured and unsecured loan products.

  • Manage your credit utilisation ratio well. Experts recommend that you do not use more than 30 percent of the credit limit across all cards. When you come close to maxing out your cards, a lender tends to view you more unfavourably as a person who is heavily dependent on debt to make ends meet. Keep on mind that your score will suffer if you don’t keep a close eye on those card balances! This is also a good way to ensure that you do not overspend.

  • Determine what you need to fix. Once you have your free credit score in hand, you are on the right track. Draw up details of your income versus expenditure so that you know just how much you can repay on an EMI. Similarly, understand how much you have to pay by way of credit card payments. Inculcating financial discipline will help you greatly.

The bottom line

It is never too early nor too late to improve CIBIL score. All it takes is time and effort, and the discipline to monitor your expenditure. Taking care of your credit score can be your gateway to good financial health, so start now!

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