A strong credit score is one of the most crucial indicators of your health financially and tells lenders about your behaviour towards credit. Higher your credit score, the higher your chances of getting approval for a line of credit, credit card or any loan, particularly when you require it a lot.
What parameters contribute to your score?
Payment history is one of the most influential parameters of any credit bureau. The logic here is if you are not making payments on other credit cards or loans, there is an extremely high chance that you will not repay your new ones. Thus, any delinquency lowers the chances of getting a credit card or loan drastically. Other parameters that make up your credit score are credit history, credit utilization, new credit, and credit mix.
How to improve the CIBIL score immediately?
Forming a credit score is the simplest part. Your credit product usage determines if your score stays high or begins to dip, and that is where crucial tips to ameliorate your score come in handy. However, remember that improving your CIBIL score immediately is not easy. It takes some time to improve. Here are the important tips –
Make credit card and loan repayment on time –
No matter whether it is a credit card bill or loan EMI, timely repayments are important for your credit score, as payment history is a crucial ranking factor in computing your credit score. In case you are busy or forgetful by nature, set the payment reminders for all outstanding payments and bills at least two to three days before the payment due date, which endows you with an additional buffer.
Also, you can set up an automatic payment facility from your net banking to make sure you do not miss out on any payment. Most loan payments are directly debited from your bank account according to the mandate you give the lender. Such a reminder will assist you in ensuring your account is adequately funded on the EMI date.
Keep your CUR (credit utilization ratio) low.
If you are someone who lives on the edge, this behaviour will drastically affect your score. Using your card for making the payment to get reward points, discounts etc. is fine if you can make the repayment of the whole amount on time. However, if you are paying just the MAD (minimum amount due) and continue rolling over balances to next month, not just do you incur interest fees, but your thorough credit utilization ratio enhances.
Try and avoid using more than thirty per cent of your available credit card limit any time and continue keeping your outstanding dues low throughout all cards. The lower your credit utilization ratio, the higher your credit score. Also, you can try and request your bank for an enhancement in the credit card limit. If you already hold a high score, it is possible your bank might even send you an offer stating you are eligible for limit increment, and this might reduce your credit utilization. Note that accepting or requesting a credit limit increment can create a temporary impact on your credit score.
Get the secured credit card –
If you want to keep utilizing a credit card, however, if your repayment is an issue or you want to adopt a more responsible approach, then you can opt for a secured credit card. Such cards are issued against collateral, usually, a fixed deposit held with financial institutions and have a lower credit card limit of generally 75 to 90 per cent of the fixed deposit amount.
In case your previous credit card or loan application got denied owing to a low credit score, then secured credit cards can assist in ameliorating your score as well as your credit history only if you use your credit card responsibly and repay its dues on time in full.
Avoid placing applications for new credit cards or loans until necessary.
Every time you place an application for a credit option, a credit card, line of credit, lenders access your credit report from the credit bureau to analyze your creditworthiness. This is addressed as a hard enquiry. Too many of such hard enquiries result in a drop in your credit score, apart from reducing your overall credit age. Apply for a credit card or loan just if you require it or face any kind of emergency.
Being a consumer, you can even access your score and report. Your score gets recorded by the credit bureau, and you can fetch it to check your score. This process is addressed as a soft enquiry. You can conduct CIBIL check free just once every year.
Reporting discrepancies in the credit report
No system can be perfect, and it’s possible that with disciplined credit behaviour from your side, a discrepancy or error in your report can be reported to the bureau instantly. However, this is only possible if you constantly review your credit report. This assists you in locating and disputing any mistake instantly. In the case of an online lending marketplace, you can raise the query with the bureau for each item linked with the credit product, track the query, and get the resolution from a credit bureau once they authenticate that your concern is legit.
Aim for a healthy credit mix
A credit mix of distinct credit products is a crucial ranking factor not just for computing your score but even in ameliorating your score and forming a good history. These can be a healthy mix of unsecured and secured loans, lines of credit, credit cards and others. This endows an indication of your potential to manage your credit in a disciplined manner and at higher stability, just like a home loan.
Retain older credit cards
Credit history length is the next important parameter for deciding your credit score. As you become older, your income enhances; there are chances to place the application for high-end credit cards and stop using the older ones by closing them. However, doing so can impact your credit score massively. Even if you apply for new credit cards, ensure to keep using the older ones as this keeps your credit age long.