When you apply for a loan or credit card, banks check several factors to approve your request. CIBIL score is one such factor. It is one of the key parameters that determines whether you qualify for a loan or credit card. This three-digit number reflects your creditworthiness. Banks check the CIBIL score to determine the loan terms and approve your loan or credit card request.
A high CIBIL score will help you get loans and credit card requests at better interest rates. A CIBIL score between 750 and 900 is considered a good score, as per bank bazaar. However, a lower credit score may result in unfavorable loan terms or your application being denied.
3. Clear dues: Make sure all dues are paid on time. Otherwise it will have a negative impact on your credit report and lower your CIBIL score. Paying your dues on time shows that you are a disciplined borrower and gives banks the confidence to extend credit.
4. Minimum amount payable: It’s a small portion of the outstanding amount that must be paid on your credit card bill each month to avoid late fees. If you only pay this amount, your debt may increase over time, such as interest costs on the remaining amount. Therefore, credit card bills must be paid in full to avoid additional charges.
5. Apply for multiple credit cards: When you apply for a credit card, the bank will make rigorous inquiries to determine whether you qualify for the credit card. Strict questioning will temporarily reduce your CIBIL score. Applying for multiple credit cards means the bank will make multiple hard inquiries, which can significantly reduce your CIBIL score.
6. CIBIL Report: CIBIL reports show details of your previous and current credit accounts. Any errors in this report will affect your CIBIL score. Review your CIBIL report regularly to check for errors and report them to the bank for correction.
7. Length of credit history: Credit history shows transactions since you opened your account. Having a longer credit history will help banks accurately check your repayment activities.
8. Lack of credit portfolio: If you have a good mix of different credit options, banks will consider you to be better at handling various types of credit. Having a healthy credit portfolio will have a positive impact on your CIBIL score.
9. Don’t close old credit card accounts: Closing an old credit card account will eliminate the long-term credit history associated with that card. If you’ve had a credit card for a long time, don’t think about closing the account; however, you can close the account on a new credit card because your credit history is relatively short.
10. Debt to income ratio: This ratio shows the portion of your income that is used to pay down your debt. A higher debt-to-income ratio indicates a greater reliance on borrowed money. This means your current income is not enough to qualify for new credit. However, a lower debt-to-income ratio means less of your income goes toward debt payments. This can improve your credit score and improve your chances of getting a loan or credit card.
In summary, CIBIL scores are very important in assessing your credit eligibility. Therefore, maintaining a good score is important to get worry-free loans and credit cards. One of the important steps to improve your CIBIL score is to pay your dues on time.