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CIBIL Score Improvement: What Are the Steps?

Why should I improve my CIBIL score? Does it matter— these are questions people generally ask?

TransUnion CIBIL Ltd, is one of the most trusted organisations that provide a borrower’s credit score and report. 

An excellent CIBIL score is essential because that’s how your lenders evaluate your creditworthiness, and it is generally the decider for them when granting or rejecting your loan application.

The CIBIL score is a three-digit credit score ranging from 300 to 900. Borrowers with a poor CIBIL score (600 to 700) could get rejected for a home loan, while those with an excellent credit score (750 to 900) could negotiate lower interest rates.

This post contains tips to improve CIBIL scores to better your chances with home loan applications online.

Tips To Improve CIBIL Score

If you have an excellent CIBIL score (750-900), you have a good chance of acceptance. A low CIBIL score reduces your chances of securing a loan. 

Although a low CIBIL score cannot get you a home loan, you can improve it over a period of time by changing your financial behavior and borrowing and repayment habits. Check below for tips to help you improve your CIBIL score quickly:

Low Credit Utilisation and Prompt Payment of Dues

A low outstanding balance on your credit card can help raise your credit score. You can either spend about 30% of your credit limit (people with high credit ranking spend only 7%) or ask your bank to increase your credit limit.

The second thing to do and the most significant factor influencing your credit score is paying your credit dues on time & in full. CIBIL will use your lower credit utilisation and timely payment information to calculate your CIBIL rating, which will help improve your credit score.

A Combination of Secured and Unsecured Loans

A history of more secured and lesser unsecured loans boosts your credit score. 35% of your credit score reflects your repayment history, and your credit score will drop with every late payment. Make timely repayments.

The best way to let lenders know that you know how to manage your money is to pay and repay your loans and credit card dues simultaneously.

Don’t Default on your Equated Monthly Installment (EMI)

Most people buy smartphones, television sets, refrigerators, furniture, etc., on EMI. Buy on credit only if you can be sure of paying the EMIs on time. Credit score depends on your repayment history. If you default in delivering EMIs, your credit score can fall, but paying them on time can improve your credit score.

Avoid Sending Financial Stress Signals

The credit bureau mechanism quickly senses financial stress and marks borrowers as risky. Stress signals could be using a personal credit card, securing cash advances to meet business expenses, missing a credit card dues payment, EMI, or loan repayment. 

Don’t Close Accounts that Reflect an Excellent Repayment History

Keep old credit accounts active that reflect an excellent repayment history. Keep such an account active to boost your CIBIL score.

Limit the Number of Loan Applications

CIBIL keeps track of every loan application that you send out, and if you send out too many, you give them the impression that you are desperate for credit, and such an impression can lower your credit score.

Moreover, the lenders will request CIBIL for your credit report. If the enquiries are too many, your credit score can also be brought down.

Exercise Caution While Applying for Loans

When a bank or financial institution rejects your loan applications, it indirectly indicates that you could be a risky borrower to other banks and financial institutions. Hence, it is necessary to ensure that your loan application and the essential documents are as per the requirement to avoid rejection.

Conclusion

You may miss out on paying back your EMIs on the due date and have no issues paying later with the late fee. But that could bring down your CIBIL score and affect your future borrowings. You can secure a home loan (apply online) by using the tips in the article to improve your CIBIL score.

If you are looking for funds to buy a new home or expand your business but find it challenging to obtain a loan, contact Grihashakti to help you with your financial needs. They provide home and business expansion loans and financial advice to help you better your credit score and achieve your goals.

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