How To Improve Your Cibil Score: When you visit a doctor for medical treatment, the first thing he asks for is your recent medical history, diagnostic reports, and prescriptions so that they can know your health condition.
Such vital information helps them determine the treatment and medicine for you.
Similarly, when you approach a lender for a credit facility, the first thing that they want to check is your financial health to assess if you are able to afford a credit facility.
Whether you have the creditworthiness to repay their loan or credit card bills, and how do they check it?
They assess the financial health of an applicant through the Cibil score.
A Cibil score is a barometer of one’s financial health that tells if one is financially sound enough to afford a credit facility.
A high Cibil score holds you in good stead, and the lender offers you loans at a low interest rate.
But a poor Cibil score makes your case weak before a lender, and you are either denied the loan outright or given it at a high rate.
However, sometimes, due to your financial condition or for sheer carelessness, you default on credit payments and lose points from your CIbil score.
In this write-up, ZeeBiz will tell you different ways to maintain a healthy Cibil score.
Pay installments on time
If you have taken a loan or have equated monthly installments on a credit card, try not to miss your monthly payment.
Just a single payment miss can cause a dip in your Cibil score to a great extent.
Even if you don’t have sources to pay on time, inform the lender in advance.
They may consider your request for a late payment, but missing an EMI can mar your Cibil score.
Control credit card spending
Sometimes the lender offers you credit cards with a high credit limit.
But if you use that limit fully in every bill cycle, you may lose points in your Cibil score.
An ideal credit utilisation ratio (CUR) is considered to be 30 per cent.
It means that if you have a credit card(s) with a combined credit limit of Rs 1 lakh, you can use only up to Rs 30,000 every month from them.
It will keep your Cibil score high.
There may be genuine situations when you need to cross the 30 per cent limit; if you do that, try to pay your bill before the due date.
Don’t take multiple loans
Sometimes, if you take many loans, the lender thinks that you have too much dependency on borrowings and have insufficient balance in your account.
Having many loans also makes your Cibil score poor.
Instead of taking many loans, you can take one big loan and pay your EMI on time.
It will boost your Cibil score.
Do these things after loan settlement
Loan settlement is good to get you out of the debt trap, but when you settle a loan with a lender, it gets reported to the credit agency.
When you settle a loan, the word ‘settled’ is written against your loan account.
It shows that you haven’t repaid the loan within the stipulated time.
Due to it, your credit score will be spoiled.
The easy way is- whenever you have the financial resources to repay the loan, approach the lender and tell them you want to return whatever exemption you get in dues, i.e., principal, interest, penalty, and other charges.
Once you make these payments, the bank will close your loan completely and give you a no-due certificate.
Think carefully before becoming a loan guarantor
Sometimes, when one of our close friends or relatives takes a loan, we become a guarantor, as we hope that the borrower will repay their loan on time.
But before signing the papers to become a guarantor, remember that if the borrower doesn’t repay the loan on time, it will also affect your Cibil score.
Not only will it cost you your Cibil score, but you may also have to repay the loan if the borrower defaults.
But even if you have to become the guarantor for a person’s loan, keep an eye whether they are repaying it on time.
