With the popularity of opting for external financing increasing each day, credit score has become one of the most frequently discussed terms in the market. This score ranges between 300 to 900, and the closer the score is to 900, the better the terms one can enjoy while availing credits.
This 3-digit score represents an individual’s creditworthiness as a borrower. Being aware of how to increase credit score can be beneficial for prospective loan applicants, as it will help them leverage their position to enjoy better loan terms.
So, here are a few pointers that can help increase your credit score by 200 points.
5 tips on how to increase cibil score significantly
- Making timely payments
The easiest way to improve credit score is through timely payment of outstanding debt. Missing or being late into repayment, even for a single instalment, can hurt an individual’s credit score.
2. Keeping credit utilisation in check
The credit utilisation ratio carries about 25% weightage in determining the credit score of an individual. This ratio signifies the percentage of credit used against the available credit limit. Experts suggest keeping it within 30%-40% to maintain a high CIBIL score.
In line with this, another pointer to keep in mind is the FOIR. This stands for the fixed obligation to income ratio. This percentage indicates the portion of one’s monthly income spent on meeting the fixed financial commitments. This ratio shares an inversely proportional relationship with the creditworthiness of an individual. Hence, experts suggest that it is ideal to keep this ratio within 50% to better the chances of securing a loan.
3. Refrain from multiple credit applications
Once an individual applies for a loan, the lender places an inquiry to check for the credit profile of that borrower. These queries are reflected as hard ones on the credit report and remain for more than a year.
Thus, making multiple queries like these in a short span can adversely affect an individual’s credit score and may lead to the rejection of a loan application.
4. Diversifying the credit portfolio
Maintaining a balance of secured and unsecured credits can help individuals improve their credit score. Also, diversifying their portfolio with long and short term loans can portray a borrower as a responsible one.
Keeping a diverse portfolio like this will help prospective borrowers to obtain the best personal loans without any hassle.
5. Rectify the discrepancies on the credit report
Financial experts suggest that individuals should check their free CIBIL score and report periodically for any errors in it. Discrepancies in this report can lead to the lowering of the CIBIL score, hence, rectifying such mistakes is essential.
Being mindful of the pointers on how to increase credit score can aid individuals to better their credit profile without any hassle. Moreover, along with these pointers, individuals should also be aware of the benefits of having a high CIBIL score and use it to their advantage to get a personal loan to meet their financial needs.
If you are able to increase your credit score by following these pointers, you’ll be able to enjoy certain exclusive benefits.
Benefits of having a high CIBIL score
- Negotiate better interest rates
Individuals with a high CIBIL score can leverage their position to avail the best personal loan interest rates.
2. Get better loan terms
Borrowers can take advantage of their improved credit score to negotiate and avail better loan terms, such as low additional charges, suitable personal loan tenor that works, flexible repayment structure, etc.
3. Higher loan amount
A noticeable benefit of maintaining a high credit score is that it helps individuals to source a higher loan amount, irrespective of the type of personal loan.
4. Quicker approval
A high credit score projects applicants as responsible borrowers. Resultantly, they can receive quick approval against their loan applications. Moreover, the availability of pre-approved offers by leading financial institutions like Bajaj Finserv further expedites this process. These offers are also available on business loans, credit cards, etc. Borrowers can check their pre-approved offer online in a few easy steps.
Being aware of the methods of how to increase credit score can help individuals to better their ratings. However, it is vital to understand that this does not happen overnight; rather, it takes a period to attain a score upwards of 700. Also, achieving this feat is not the end of the road; prospective borrowers need to maintain their credit score as well to avail its aforementioned benefits.