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5 Tips To Maintain And Improve CIBIL Score

Are you planning to apply for a credit card or loan? Is you CIBIL score well sorted? Do you have a high credit score? The term CIBIL score/credit score may seem new to most of you, but it is the first thing that is checked by the bank when you apply for a credit card or loan. If your credit score is messed up, then its time to improve it so that you don’t face any trouble in getting a credit card or loans in future.

Though there is not a particular way to increase your CIBIL score overnight, yet by following the 5 tips listed in this post, we are sure, you would be able to maintain and improve CIBIL score.

improve cibil score

What Is CIBIL Score?

For those, who are unaware, CIBIL (Credit Information Bureau India Limited) is the central credit information company in India. Credit score is the score or number assigned by Credit Information Bureaus to each individual on the basis of his/her credit history pertaining to loans and credits. It indicates credit worthiness of the individual.

Banks report all your financial information to CIBIL. This information could be your inquiry about a home loan to your bank, or getting a credit card from your bank and whether you pay your EMI’s on time or not. CIBIL score of a person could lie between 300 to 900 points. A score above 750 is considered good by banks. If you have a good credit score then it means that you can be trusted by lenders. This will benefit you at the time of lending money from financial institutions.

5 Tips To Maintain And Improve CIBIL Score

As we said earlier, there is not a particular way to increase CIBIL score, however by following these 5 tips, you would be able to build, maintain and improve your credit score.

1. Make Timely Payments

Never miss or delay your loan EMI or credit card payments. Your CIBIL score will be impacted negatively if you miss a payment or if the payment gets delayed. Avoid making payments by cheque, one day prior to due date. The procedure of cheque clearance may take more than one day which will lead to delay in you payments.

You can avoid missing deadlines of EMI or bill payments, by automating the payments such that the payments will be automatically be deducted from your bank account every month. It is also advisable to set a reminder for the payments. You can set a reminder around a week prior to the last due date to avoid missing payments.

2. Don’t Be Credit Hungry

Credit hungry behavior negatively impacts your CIBIL score. What shows your credit hunger with too much dependence on credit includes:

a. Having too many credit cards: Gone are the days when people flaunted too many credit cards as status symbol. Having 5-7 shows your credit hunger. You can instead use 2-3 credit cards with high credit limit and make their payments on time to improve your credit score.

b. Taking multiple loans: If you have availed too many loans- car loan, home loan, personal loan, education loan and more, then this is really going to impact your CIBIL score badly. It is advisable to take not more than 2 loans simultaneously.

c. Too many inquiries: Every inquiry made by you is reported to Credit Information Bureaus and are reflected in your credit score. Too many loan inquiries- (home loan, car loan, personal loan) in a short duration of time shows your credit hunger and impacts your CIBIL score negatively.

3. Use Your Credit Card Conservatively

It is advisable to use your credit card conservatively. But what exactly does conservatively mean? Though there is no particular definition of using credit card conservatively, it is suggested that people should utilize only 30-40% of the credit limit every month. It should not go beyond 40%. Exhausting full credit limit negatively impacts your CIBIL score.

If you require more credit, then you can apply for another credit card instead of exhausting 80-90% of the available credit limit of your card. Or you can also ask the bank to increase the limit of your credit card.

4. Credit History Duration

If you have taken a loan or are using a credit card from past few years and are also making the payments on time, it means you have a good credit history compared to an individual who has started using a credit card from past few months. The individual in the latter case, will not have a a strong credit history. So, more duration of good credit history helps you build a good credit score. If you don’t have a credit card yet, then its time to get one, to build your credit history, use it and make the payments on time. Check out benefits of using credit card here.

5. Right Mix Of Secured & Unsecured Loans

Secured loans like home loans help in building good credit score. Unsecured loans such as credit card debt and personal loans, impact the CIBIL score badly. Having higher amount of unsecured loan shows your higher dependence on credit and leads to messed up credit score. You should thus, have a proper mix of both types of loans. The percentage of secured loans should be more than unsecured loans. It is advisable to maintain 80-20 ratio (80% secured loans and 20% unsecured loans).

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Also Read: How To Reactivate Inoperative/Dormant Bank Account

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