Your credit
score will affect your life in more ways than you can think of. Although a
large number of people think that credit score is necessary for getting a
personal loan or credit card, etc. it’s only partially true.
Apart from
affecting your chances of getting a loan or a credit card at an attractive
interest rate, your free CIBIL score can also have an impact on your happiness
as well. If there is a big difference
between your score and that of your spouse’s then it can affect your marriage.
In fact, a low credit score can also lower your chances of getting a job of
your choice.
There is
literally no dearth of the reasons why you should increase CIBIL score.
However, one might wonder, what does a low CIBIL score look like?
How to know where you stand?
If you want
to maintain a healthy credit report, it would help you greatly to learn how a
credit score works.
CIBIL,
which is one of the most popular credit rating agencies of India and partner
with a large number of banks and NBFCs, scores on a scale of 300 to 900.
In other
words, you can have the lowest free CIBIL score of 300, and the
highest of 900. However, the question is, when should you start getting
worried?
Above 750:
A score
above 750 is considered a good score. So, if yours falls into this category,
then there is nothing to worry about. You have a good credit profile, which
means not only you will be able to obtain loans easily, you will be able to do
so on favorable terms and a low interest rate.
Between 600 and 750
A score
ranging between 600 and 750 is considered an average score. What it means is
that while you shouldn’t be worried, it would help to take an action. Below 600
If your
score is below 600, then it should get you worried. Not only you need to stop
your score from dropping further, you should act immediately and try to improve CIBIL
score as fast as possible.
You never
know when you are going to need a loan, and you want your profile up to the
mark for the same.
Improving
your credit score isn’t that complicated but it’s not easy at the same time.
The
following are some of the most effective things that you can do to improve your
score:
1. Improving Repayment Habits
Your
repayment history plays the biggest role in the calculation of your CIBIL
score. So, if you have made a lot of late EMI payments and credit card payments
in the past, then your score won’t be able to increase.
To improve
the score, it’s important to take every single loan payment seriously. No
matter what happens, make sure that every payment is made on time, every single
time.
If you are
able to maintain a consistent repayment history, then you can enjoy an
impressive credit growth.
2. Improving Credit Variety
What’s your
credit history made of? Is it based solely on a personal loan or a home loan?
When your credit history is unidimensional, it will help your score only so
much.
What you
need is to bring a variety in your CIBIL report. So, if you have only taken a
personal loan in the past, then maybe you can apply for a credit card.
Similarly, if your history is based on just a home loan, then you can apply for
a car loan as well. This will surely help your score grow.
3. Capping Your Credit Utilization
Do you max
out your credit cards frequently? If your answer is “yes”, then perhaps that’s
the reason behind your low score.
You should
always keep your credit card usage under control. Ideally, you should never
spend more than 30-35% of the limit available on the credit card.
4. Avoiding Sending Multiple Loan Applications
Did you
know that applying for a loan at multiple banks at the same time can have an
adverse effect on your score? This is because it leads to multiple credit
inquiries that are made by the banks to check your credit profile. This raises
suspicions and damages your score.
To stop
your score from taking any further damage, it’s important to hold off sending
multiple loan applications. Instead, send them one by one with a decent gap
between them.
For best
results, keep an eye on your credit report. Observe the changes closely so that
you can act accordingly on time.