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Worried about weak CIBIL? Here’s how to improve your credit score

CIBIL score, credit score: The credit score is the complete summary of an individual’s credit history. It is used by banks, lenders, and other financial institutions to decide on loan eligibility. The score is considered to be an indicator of the likelihood or regularity with which the borrower will be able to repay the loan.

A high score establishes a good, consistent credit history that includes timely payments as well as past credit usage. A low score indicates risk and less conviction on the part of the lender. There are many factors behind this, such as late payments, defaults or regular loans. The CIBIL score is between 300 and 900. If the score is greater than 800, the score is considered Excellent. The rating depreciates as the score drops. Below 360, it is considered poor.

Harshad Chetanwala, a certified financial planner and co-founder of MyWeathGrowth, said it takes time to build a good credit score. The score can deteriorate much faster if one is not careful with credit management. If the score is not up to par, the borrower may not get the best interest rate when the loan is required.

Now that your credit score matters, especially when borrowing money or applying for a credit card, try these tips for maintaining a healthy CIBIL score to avoid rejections:

1. Examine your credit score

Anyone can access the credit score and view the details using the CIBIL website or report. Most importantly, check if the data is correct, especially the credit history. Sometimes there might be some disputes that the applicant can identify and take the necessary action to avoid any impact on the credit rating. The person can raise a dispute via the CIBIL website in the event of a discrepancy. Sometimes the cost of these problems can be much higher, so it is advisable to review the credit score before applying for a loan.

2. Pay IMEs, Credit Card Bills On Time

It is advisable to pay IMEs, credit card bills in advance to avoid possible degradation of credit rating. Set reminders for the due date. Nowadays, everyone is preoccupied with many tasks. As a result, there may be times when someone misses a credit card or loan payment. Such a default has a credit score implication. Therefore, always make the payment on time and, if necessary, set a reminder for the payment a few days or a week before the due date. Payment of dues constantly helps to improve the credit rating.

3. Do not exceed the credit limit

The amount of credit that an individual tends to use can also have an impact on credit history. This is reflected in the credit rating. Hence, it is better to apply for a loan only when needed. Avoid taking occasional credits, even programs offering devices or gadgets on EMI by credit card. Credit cards are one of the most expensive ways to take credit if they are not paid off on time. Often, individuals enter the vicious cycle of paying by credit card, which impacts credit scores.

4. Plan for early debt closure

Planning for early debt closing can help improve credit scores. Prepare the loan in full if possible. One of the ways to close the loan early is to continue to regularly accumulate a certain amount either in a bank account and use it to reduce or pay off debt. For long term loans, lenders offer to make partial payments. This will reduce liability and make it easier to prepay loans.

5. Avoid taking out loans from multiple lenders at once

Don’t apply for and take out loans from multiple lenders at the same time. It is best to pay off the existing loan first and then apply for another loan if necessary. This is the right way to maintain a good credit rating. This gives the impression that the borrower has more control over his finances and does not need more credit.

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David A. Albanese

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