When you go to the bank to take any kind of loan, then you have to assure the bank that you will repay that loan with interest in the given time.
For this, the bank checks your CIBIL score. The CIBIL score is between 300 to 900, the more your CIBIL score is closer to 900, the more loan you are likely to get.
If we look at an analysis, then 80% of the loans in all over India have been given to those with 750+ CIBIL score. Now you must have come to know how important CIBIL score is for loan. If your CIBIL Score is 750+ then you have to take care that your score does not come down.
Ways to Improve CIBIL Score
Now understand carefully, because if your CIBIL score is low and in the coming time when you need a loan, then your loan will be rejected or will be available on high interest.
First of all you should check your score on CIBIL website. Here we will tell you what things you have to take care of so that if your Cibil score is low then you can improve it.
If your Cibil score is already good, then you can maintain it with the information given here. Here you have to take special care of the following things.
Your Name In Documents
Keep Old Credit Card
(1) REPAYMENT HISTORY
Whenever CIBIL checks your CIBIL Score, it sees your old records. That is, whether you have regularized the re-payment of your previous loan over time or not. Keep in mind here that Cibil also looks at your many years old history. In this Repayment History, if it is seen that you have paid any loan after the due date, then your Cibil score will be reduced.
Apart from this, if you have a credit card and you have not paid it on time or are paying Minimum Amount, then your Cibil score will be reduced.
If you have a credit card and a loan is also going on, in such a situation, get “Auto Pay” activated from the bank, so that your payment will be timely and the Cibil score will also increase. There can also be another reason for the payment delay…
Suppose there is a dispute with your bank, which happens quite often. Dispute means that you had taken a loan, its EMI was also paid timely and after some time the bank tells you that you will have to pay some hidden charge.
If you do not accept this hidden charge, in such a situation, you quarreled with the bank and stopped the EMI as long as this quarrel goes on.
Here you have stopped EMI, so your repayment history will get spoiled and your Cibil score will be reduced.
To avoid this, do not stop your EMI and solve your issue with the bank quickly, which increases your Cibil score.
(2) Credit Exposure
Let us tell you here that 25% of your Cibil score is based on Credit Exposure. Let us understand this with an example…
Suppose, you have got a limit of 1 lakh on your credit card, you can use up to 80,000 or 90,000 of it.
In such a situation, your Cibil score will be low even if you do Repayment before the due date, because here it will seem that you always need money, you are Credit Hungry.
Now to avoid this, if you have got a credit limit of 1 lakh, then use up to 30% of it, you will not get credit hunger and your Cibil score will also increase.
If you have any EMI going on and credit card payment is also going on, then all this together should not exceed 40% of your income.
That is, if your income is ₹ 50,000, then your EMI and credit card payment together should be up to ₹ 20,000.
(3) Credit Mix
Credit mix means that how many types of loans you have. Here the type of loan means Unsecure Loan and Secure Loan.
Unsecured loan means credit card and personal loan. Secure Loan means Loan like Home Loan, Car Loan.
If your Unsecured Loan is more and Secure Loan is less, then your CIBIL SCORE is low.
On the contrary, if your Secure Loan is more and Unsecured Loan is less then your CIBIL SCORE will increase.
To avoid this, 20% of your credit limit should be an unsecured loan, only then your Cibil score will increase.
Suppose, your monthly income is ₹ 50,000, in this case your credit limit will be ₹ 25,000. Now you have to use 20% Amount of ₹ 25,000 in Unsecured Loan.
Apart from this, if you take two-three loans within 3 to 4 months, then Cibil will feel that you are very eager for money and you need money all the time.
That is why your cibil score will be low, but if you keep a gap of 6 months or 1 year between two loans, then your cibil score will increase and your history will also look good.
(4) Multiple Enquiries
Your Cibil Score is 20% based on Multiple Enquiries. Now consider carefully…
There are many such people who check without reason what is going on with car loan nowadays, at what rate home loan is available or what is the interest going on credit card.
If you jokingly go to inquire for a loan, then the bank gives your details to Cibil and says that this guy had come and was inquiring for the loan.
If you do this many times, then Cibil will feel that you are getting very eager to take a loan because you are doing a lot of inquiries in a very short time.
Note: There is no limit of inquiry, but here Cibil will feel that you are impatient, that is why your Cibil score will be reduced.
To avoid this, you just have to keep in mind that you do not inquire for more loans unless it is needed, this will increase your Cibil score as well.
(5) Your Name In Documents
If your name is linked to someone else’s loan in any way and he does not repay the loan, then your Cibil score will also be less.
If you are running a Joint Loan with someone whose repayment you do not have, only your name is connected, even then your credit score will go down.
Similarly, your Join Credit Card is going on, whose payment is not going to be done by you, in that case also your CIBIL Score may fall.
If the other person does not pay that loan or credit card bill, then your credit score will be reduced.
Apart from this, if you have become a loan guarantor in someone’s loan and the other person does not pay, your credit score will also be reduced.
To avoid this, when someone comes to you that you become a Guarantor in our loan, then you have to see whether he will be able to re-payment or not.
The person whose loan is made Guarantor should be trustworthy. If he does not repay the loan, then when you need a loan in future then you will not get it.
To understand the inaccuracies, you have to understand a little about the working of CIBIL.
The job of Cibil is to find out the Cibil score of all the people, they need all your data and details to get the right Cibil score.
This data and details reaches the bank Cibil to help Cibil find your correct Cibil score. Now we understand the Inaccuracies.
You have taken a loan and its correct payment has also been done but your loan is completed, that information does not reach the bank Cibil.
No Repayment of yours is made at all! In this case, Cibil will feel that if you are not making the repayment properly, then your Cibil score will be reduced.
To avoid this, you have to do Consumer Dispute Resolution on Cibil’s website. With this, Cibil will inquire from your bank and after confirmation, your Cibil score will increase.
(7) Keep Old Credit Card
You should never close your old credit cards, which you used to repay timely.
Because the old history will make your repayment history very strong. This will prove that if you used to do your Repayment timely, Cibil increases your Cibil score.
(8) Take Loan
If due to any reason your Repayment History has deteriorated and your Cibil score has decreased, then with this method you can increase your Cibil score.
You can take such loans which do not require much Cibil score to take and the bank will give you easily.
Here are the names of some loans, which you can take with a low Cibil score.
You can improve your repayment history by repaying this loan.
That is, you pay your EMI every month before the due date and month by month your Repayment History will improve.
With this improving history, you can increase your Cibil score back.