Elevating Your Financial Profile: Tips to Improve CIBIL Score

TransUnion CIBIL is a credit information company that was founded in 2000. Currently, it studies the credit behaviour of millions of credit users across India. The CIBIL score, which is the credit score assigned to credit users by TransUnion CIBIL, is an important indicator of an individual's financial well-being and creditworthiness. The CIBIL score ranges from 300 to 900 and to get a housing loan in India, a borrower can move ahead with their loan application only if their score is at least 750. 

A score between 750 to 900 falls within the very good CIBIL score range. People who have such a score are individuals who have a very responsible attitude towards credit and its repayment. These are people who have been using credit for at least a while and have demonstrated their ability to handle all kinds of debt. These are also people who are not excessively dependent on credit and are serious about its repayment. They have a clean repayment track record. A CIBIL score in this range not only guarantees quick access to credit but also a strong ability to negotiate for the best loan terms and conditions. 

This article is a must-read for those people who do not have the ideal score required to get a housing loan in India. Here we discuss some simple tips on how to improve CIBIL score. 

How to Increase CIBIL Score: Simple Tips that Will Prove Helpful

If you want to increase your CIBIL score, you should read about the factors that affect an individual's CIBIL score. Here are a few simple things that can prove useful: 

Build and Maintain a Clean Repayment Track Record 

Your repayment history makes up 35% of your CIBIL score and is the most important factor that affects it. Therefore, if you are looking to build up your CIBIL rating, you should build and maintain a clean repayment track record. In other words, make a habit of paying all your loan EMIs and credit card bills on time. If you have missed payment deadlines in the past, set up reminders on your phone or authorise your bank to automatically make payments on your behalf each month. If you do miss a due date, make sure to clear the pending EMI as soon as possible to minimise damage to your CIBIL rating. 

Keep Your Credit Utilisation Ratio Low

The credit utilisation ratio is the ratio of credit used to credit available. Lenders study it to understand how dependent an individual is on credit. Excessive dependency on credit is seen as a risk by lenders. A low credit utilisation ratio indicates a low dependency on credit and therefore, is seen as a sign of a creditworthy borrower. Ideally, borrowers should never let their credit utilisation ratio exceed 30%. This can be easily done if one makes the habit of using one's credit cards only if they plan to clear the entire amount due at the end of each month. 

Keep the Hard Enquiries to a Minimum 

When a credit user applies for more credit, lenders decide whether to extend a loan and on what terms and conditions after carefully studying how dependent the individual is on credit. Too many hard enquiries indicate a tendency to want to have unrestrained access to credit and therefore, is seen as a risk. Individuals who have too many hard enquiries under their name have a low CIBIL score. In conclusion, one must apply for credit only when one absolutely needs it and can also repay it without defaulting.

Maintain a healthy mix of Credit 

To improve your CIBIL score, make sure to have a healthy mix of both secured and unsecured loans. This signifies an individual's ability to handle all kinds of debt and therefore, leads to a better, higher CIBIL score. 

Keep Your Old Credit Cards and Loan Accounts Active 

Lastly, the age of your credit history also affects your credit score. So, the older your credit history, the better will be your credit score. To maintain a good CIBIL rating, one of the things that you should do is never close old loan accounts. 

Final Words

Maintaining a high CIBIL score is actually quite easy. All you need to do is understand the factors that affect your CIBIL score, which are repayment history, age of credit, type of credit, credit utilisation ratio and dependency on credit, and use your knowledge to practice responsible credit behaviour.