Having a high credit score or CIBIL score offers a significant advantage as it serves as an indicator that you are a financially responsible and trustworthy borrower. Individuals with a good CIBIL score (ideally 750+) can easily get approval for many kinds of loans, including personal loans, vehicle loans, home loans, etc.
On the other hand, individuals with poor credit scores have trouble securing any kind of loans. During emergencies when personal loans can become a necessity, getting rejected due to a bad CIBIL score can be devastating. Hence, in this article, we will take a look at a few effective ways in which you can improve your CIBIL score and improve your chances of loan approval.
Why does CIBIL score go down?
Before we look at tips to improve your CIBIL score, let us take a look at some of the key factors which can lead to an individual’s credit score going down:
- Late or missed payments on Equated Monthly Instalments (EMIs), credit card bills, and other dues
- Applying for too many loans or credit lines in a short time
- High credit utilisation
- Inaccurate reports on your CIBIL profile
Tips to improve your CIBIL score
You do not need to worry if your CIBIL score has dropped. By rigorously following these steps, you can bring your credit score back up:
Always pay your dues on time
The most crucial step that you can take to bring up your credit score is to make your monthly credit card bill, EMI, and other payments on time. If you repeatedly forget to pay your dues on time, you can set up monthly reminders to develop a disciplined repayment habit. Another way to keep up with your payments is by setting up automated payments for all your dues.
Even a single missed payment can result in a decrease in your CIBIL score, so you need to be meticulous in tracking your repayments. On-time payments of your dues will help you gradually build up your credit score.
Avoid heavy credit utilisation
As mentioned, one of the major reasons for a drop in CIBIL score is utilising your credit allowance to near maximum limits. For instance, if you have a credit limit of ₹1,00,000 and you end up utilising 90% of your limit, it can lead to your CIBIL score dropping.
To improve your credit score, try to keep your credit utilisation between 30% to 40% of your credit limit. Similarly, avoid taking on too many loans at the same time. If you need multiple loans, try to pay off one loan before applying for another.
Maintain a balanced credit mix
To improve and maintain a high credit score, you also need to have a good balance of secured and unsecured loans. A combination of secured loans (home loan, car loan, loan against collateral) and unsecured loans (credit card, personal loan), and on-time repayments for these loans can help you significantly improve your CIBIL score over time.
If you are looking for an unsecured personal loan to help improve your CIBIL score, you can get one instantly by applying through IndusInd Bank’s website or mobile app. IndusInd Bank’s Online Instant Personal Loan offers exciting features like:
- Quick disbursal of the loan amount to your account
- A 100% paperless process where all documentation verification is done virtually
- Loan amount ranging from ₹30,000 to ₹5 lakh
- Flexible repayment options that range from one to four years
- Personal loan EMI calculator to understand repayments
Report inconsistencies or errors
Periodically check your CIBIL score for any incorrect entries or wrongly reported missed payments. If you are unsure of how to check your CIBIL score, you can check it through CIBIL’s official website. Many banking apps and websites also allow you to check your credit score for free.
In case there are any errors, raise a dispute through the CIBIL portal for correction. If your bank has wrongly reported missed payments or dues, inform the bank to correct the error.
Key takeaways
Following the above-mentioned steps can help you improve poor credit (below 600) to excellent levels (750+). Ensuring timely payment of dues, avoiding using too much of your credit limit, and keeping a healthy credit mix will gradually lead to your CIBIL score improving. Most importantly, ensure that you take on loans only if you can make timely repayments to avoid negatively impacting your CIBIL score in the future.
