adminA credit score is computed using your past credit record, which contains info like your past payment record, the number of credit cards or loans used by you and others. In India, there are majorly 4 credit information companies i.e., Equifax, Experian, CIBIL and CRIF High Mark. A high score enhances your chances of availing a credit card or loan and a poor credit score thoroughly ruins it.
Financial institutions do not like providing credit cards or loans to you as they do not rely upon you with their provided money. Despite holding a low credit score, if you avail a loan or credit card, then you may have to pay a high-interest rate, or your credit card limit might be low. To prevent it, you must ameliorate your credit score. Here a major question that may surround you is ‘how to improve CIBIL score’. Read on here to understand.
What are the crucial ways to ameliorate or repair your credit score?
There are distinct ways to repair your credit score. Some of the crucial ways include –
∙ Review your credit report
One of the crucial things, you must do is to ameliorate your credit profile and score, which you can do by reviewing your credit report. Doing so would assist you in figuring out errors or mistakes in your credit report. If you see any errors or mistakes in your credit report, you must get the same corrected instantly. As the score is computed basis of the info mentioned in the report, it is extremely crucial for you to make sure that this report is thoroughly free of all errors or mistakes.
∙ Pay your outstanding dues
In case you have any outstanding credit card dues or loans, you must ensure to pay the same instantly to improve or repair your credit score a bit. Payment history is one of the crucial factors that is considered while computing your credit score. In case you have any history of delayed repayments, then your credit score may be poor and vice versa. It is an excellent idea for you to activate payment alerts or an auto debit option to make sure that you always make payments of your credit card EMIs or bills on time. Also, ensure to avoid paying just the minimum amount due or MAD on your credit card as this may enhance your outstanding due on your credit card. Always pay the full due by the due date to keep your credit score intact.
∙ Credit utilisation ratio
This is a massive parameter that is factored in while computing your credit score. The credit amount that is made available to you vs. how much of the same you are using reveals your dependency on the credit fund. It is recommended that you keep your CUR (credit utilisation ratio) below 30 per cent. So, if you hold multiple credit cards, ensure to keep a thorough check on the fund you are using as credit. Also, ensure to find out a credit card issuer who may be willing to accept numerous payments per month.
∙ Do not remove your old account from your credit report
Few of you may tend to remove deactivated or old accounts or those accounts having negative history from your credit report to make the same look good. Few of you may even try to get your old debts removed from your credit report after a time period. Getting your old accounts removed might negatively impact your credit score aggressively as they might have a strong repayment history. Also, if you have repaid your debts, then you must ensure that the same is mentioned in your credit report as this may ameliorate your credit score and even show your credibility.
∙ Plan out your credit
Many of you whose credit score fall aggressively are the ones who fail to plan out your finances well in advance. If you place an application for credit a lot of times just to enhance your credit card limit but you are not able to repay your bill in full and on time, then you may be left with a major outstanding amount along with a history of delayed payments that may lower your credit score massively. Also, placing an application for unplanned loans may leave you in an extremely poor financial state in case you are unable to repay the same on time. Thus, it is crucial for you to plan out your credit and then apply for the same just if it is extremely required and when you are thoroughly sure that you may be able to repay it.
You cannot repair your credit score in one or two days. It requires adequate patience, time, and planning. Once your credit profile and score ameliorate, ensure to not make any credit-linked errors or mistakes that may harm you. If you have no credit score, then ensure to build the same by placing an application for a secured or regular credit card.
∙ Limit the hard enquiries number
There are majorly 2 types of inquiries that may be performed i.e., soft, and hard inquiries. A soft inquiry takes place when you review your own credit. This is when potential employers look at your credit or if any checks are conducted by lenders through lending platforms. However, when credit enquiries are performed by lenders through the concerned bureaus, they may be termed hard enquiries.
Hard enquiries happen when you place the application for a loan or credit card directly on the lender’s website. Multiple such enquiries on distinct lenders’ websites may negatively impact your credit score i.e., reduce it aggressively down. Note that multiple hard enquiries in a short span are not considered as good as this may adversely lower your credit score.
Consolidate your debts
If you hold a lot of debt, you can use it to your benefit. You can avail debt consolidation loans from several lenders. Once done, you can simply pay the same in a go. Keep in mind that if you opt for a lower rate of interest on the loan, then you can repay your debt much faster.
Another way through which you can consolidate various debts is through the balance transfer option in the case of credit cards. Few credit cards often hold a promotional period during which they tend to levy 0 per cent interest on the balance on your credit card. However, a balance transfer charge can cost you anywhere from 3-5 per cent of your amount.
Ending note
Once you are indebted, you are closely watched by the lenders. No transactions that are conducted by you in the market may go unnoticed and the same is maintained as well as recorded in your score. Your CIBIL score range anywhere between 300 and 900 wherein 300 is the lowest limit and 900 is the highest limit. And 750 and above is a credit score considered good by lenders.