Most financial organizations have set criteria to evaluate borrower’s repayment capacity as lending is risky. CIBIL rating is one of the major criteria for loan approval, it represents a quick summary of your past credit performance. To avail unsecured personal loan on your term and conditions minimum CIBIL score required is 750.
What is reflected as a good credit score?
CIBIL is one of the four credit bureaus generating credit reports for individuals. A CIBIL score of between 750-900 can be an advantage for those looking for a personal loan urgently.
If your score is below 750 you don’t need to worry about that, it can be improved anytime. Only you need to focus on the below-mentioned factors.
1. Set reminders for repayment on time
Be disciplined and give priority to the repayment of outstanding debts, you can also set reminders for payments. Missing out on repayments can be a huge mistake in the form of a penalty it can also negatively impact your credit score.
If you’re unable to make timely repayments, you should approach your lender to let them know about financial trauma. Lenders will help you in situations of financial pressure.
2. Review your CIBIL report and rectify errors
Must ensure that your report is error-free as creditworthiness is calculated on the information mentioned in a credit report. Analyze your report continuously within a specific period to know unknown errors and correct them, it can improve your credit score.
3. Choose a strong and healthy credit mix
It is always advisable to have a good credit mix of unsecured loans and secured loans. Too many unsecured loans show a negative sign and may decline your loan applications in the future. An individual with great management skills is preferred by financial institutions and the bureaus also give a good credit rating to those applicants.
4. Keep old accounts and credit cards open to extend credit history
If you have an old credit card or loan account try to maintain it for a long duration by making repayment on time. This will help you to build a healthy credit history. For improvement of credit score avoid closing any old accounts that have been already paid off on time.
5. Avoid being a joint account holder
Don’t become a joint account holder/guarantor of the loan if you’re not disciplined enough or another person is not so capable to repay on time. In case of any default, it will also get reflected on your credit report.
6. The restricted number of hard inquiries
A large number of hard inquiries within a short time span will affect your credit score because it means that you need money urgently but you’re facing various financial problems. Less inquiry does not affect your credit score.
7. Don’t apply for multiple loans at the same time
Applying for multiple loans at a single time shows your profile is risky from the lender’s point of view. It is always a better option to take one loan at a time and make repayment timely to boost to your credit score.
Every time you apply for fresh loans such information gets recorded in the report. Multiple applications drop your credit score because it reflects your credit hungry behaviour.
8. Keep your Credit Utilization Ratio low as possible
Do not utilize your credit card to its extreme limit to boost your credit score. It is advised to keep your ratio low; preferably keeping the credit utilization ratio in the range of 40% to 70% does not impact your credit score. It shows your responsible and rational thinking about using credit cards.
9. Opt for a longer loan repayment tenure
Always choose a longer tenure to repay the money on time. Longer loan tenure will reduce your EMIs and you will be easily able to make all the payments on time. You can keep yourself away from the defaulters’ list and it will enhance your credit score and performance.
10. Increase your credit card limit
You can also ask to increase your credit card limit because it does not mean that you are going to spend more money, but it means you’re smart about managing your expenses. Keeping your credit card utilization ratio is an easy way to create a positive impact on your credit score.