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Why should I increase my score?

Your CIBIL™ score, or any other credit score, is the first impression lenders have of your credit behaviour. If it is low, it serves as a warning signal of your credit behaviour and there is a high chance that your loan or credit card application will not be approved. It is a good idea to make sure that you create and maintain a good credit score so that you are free from the tension of being rejected when you urgently need a loan.

CIBIL™ is one of the four authorized credit bureaus in India which provide a credit score, the others being Equifax, Experian and CRIF High Mark.

It is advisable to have a credit score of 750 or above to avoid the possibility of loan rejection Here are some tips on how to increase your score.

MAKE PAYMENTS ON TIME : Your payment record is the most important factor in calculating your credit score and can form up to one-third of your score. It is very important to make sure that you make all payments on time and in full. Even a single missed or delayed payment can affect your score.

DO NOT EXCEED 50% OF YOUR CREDIT LIMIT : For example, if your credit limit is Rs. 1 lakh, limit your monthly spending to less than Rs. 50,000. If you consistently exceed that limit, it reflects lack of spending discipline and will negatively affect your score. Keeping within this limit will help increase your score.

CHECK YOUR CREDIT SCORE ON A REGULAR BASIS : You might think that you have a good credit score, but there might be other factors, like administrative errors or fraud, that might be dragging down your score. For instance, you might have paid your loan in full but it might still be shown as outstanding due to a reporting mistake. Check your report and immediately notify the bureau of any mistakes or suspicious activity so that it is rectified right away. Eliminating these errors will help improve your score

MAINTAIN AN OPTIMAL MIX OF LOANS : Maintain a balance between secured (home/auto/gold) loans and unsecured (personal) loans. Having a higher proportion of secured loans has a positive effect on your credit score.

AVOID APPLYING FOR MULTIPLE LOANS IN A SHORT TIME PERIOD : If your loan has been rejected once, be patient - don’t apply immediately to multiple other banks. Each time your loan or credit card application is rejected, it affects your score negatively, so the more times your loan is rejected, the worse your score becomes. When lenders receive an application they access your credit report through an ‘enquiry’. Too many enquiries without corresponding loan approvals leads to a drop in your score. It is advisable to first improve your score and your credit-worthiness before applying again for a loan.

Financial concerns are a major stress point for many people. A poor credit score only increases financial problems as it severely limits your access to loans. Worrying doesn’t help you to increase CIBIL™ score. Start taking steps to improve your score and rebuild your credit health. It is possible to undertake all these steps above and see a positive effect on your credit score. All it requires is some commitment, financial discipline and patience and you will enjoy tension-free access to credit in the future.

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