Your credit score actually reflects your creditworthiness and financial credibility. A strong credit score increases your chances of approval for loans, credit cards, and rental applications. Conversely, a low credit score can hinder credit access or result in higher borrowing costs. Maintaining a good credit score is crucial for your financial stability and upheld creditworthiness. Let us discuss 12 proven ways how to increase credit scores.
But first, let us understand what is CIBIL.CIBIL, also known as Credit Information Bureau (India) Limited, is India’s pioneering credit information company responsible for gathering and managing credit information on individuals and businesses. Your CIBIL Score is a 3-digit number that ranges from 300 to 900, and it is calculated based on your credit history and payment behaviour. The higher your score, the better your creditworthiness.
Now let us understand the 12 proven ways how to increase credit score.
Make Timely Payments of Your BillsOne of the most important factors that affect your credit score is your payment behaviour. Late payments or missed payments can bring down your credit score subsequently. Make sure you pay all your bills, including credit card bills, on time every month.
Maintain Your Credit Utilization Ratio Low
Your credit utilization ratio is the credit amount available to use as compared to your credit limit. It is important to keep this ratio low, ideally below 30%.
Don’t Close Old Credit Accounts
Closing old credit accounts impact your credit score negatively. This is because it reduces the length of your credit history, which is an important factor that affects your credit score. Instead of closing old credit accounts, try to keep them open and use them occasionally.
Have a Mix of Credit Types
Having a mix of credit types, such as credit cards, personal loans, and home loans, can help improve your credit score. This shows that you can manage different types of credit responsibly.
Apply For Credit in Moderation
Applying for too much credit in a short period of time can negatively impact your credit score. This is because it indicates that you may be credit hungry and desperate for money. Try to apply for credit only when you need it, and avoid applying for multiple loans or credit cards at the same time.
Do Not Max Out Your Credit Cards
Maxing out your credit cards can harness your credit score. It is important to keep your credit utilization ratio low and not use your credit cards to their full limit. Try to use your credit cards for small purchases and pay off the balance in full every month.
Monitor Your Online CIBIL Report Regularly
It is crucial to check your credit report regularly to ensure that there are no errors or fraudulent activities. You can get a free online CIBIL report once a year from CIBIL’s website. You can also make a payment and fetch your CIBIL report from any other credit bureau. If you find any errors, make sure you dispute them immediately to have them corrected.
Set Up Auto Payments For Your Bills
Setting up auto payments for your bills can help ensure that you never miss a payment. This not only helps improve your payment behaviour but also your credit score.
Negotiate Your Interest Rates and Fees
Negotiating your interest rates and fees can help you save money and improve your credit score. For example, if you have a high-interest rate on your credit card, you can negotiate with the bank to lower it. This can help you pay off your balance faster and improve your credit utilization ratio.
Pay Off Your Debt
Clearing your debt can have a substantial positive impact on your credit score. It demonstrates financial responsibility and effective debt management. Prioritize paying off high-interest debt, such as credit card balances, followed by addressing other outstanding debts.
Avoid Settling Your Debt
Settling your debt means negotiating with your creditor to pay off a portion of your debt instead of the full amount. While this may seem like a good idea to reduce your debt burden, it can negatively impact your credit score. Settling your debt shows that you were not able to pay back the full amount, which can make you appear risky to lenders.
Seek Professional Help
If you are struggling with debt and are facing difficulty to improve your credit score, it may be time to seek professional help. There are credit counselling agencies and debt management companies that can help you develop a plan to pay off your debt and improve your credit score.
Not to forget, improving your CIBIL Score is a combination of good payment behaviour, responsible credit management, and regular monitoring of your credit report. These 12 proven ways can help you improve your CIBIL Score, while you take control of your finances and achieve your financial goals.
A good credit score is not just important for getting approved for credit, it can also help you save money on interest rates and fees. So, take the time to improve your credit score and you’ll reap the benefits for years to come.