A credit score ranges from 300 to 850 and tracks your creditworthiness. For a lender, this is the most important aspect to check when you apply for a loan or a credit card.
The major components of a credit score are the number of debts, credit history, repayment history, open accounts, and other such factors. Every lender will check your CIBIL score to test your creditworthiness and you will only be approved when you maintain a good score.
A good credit score ranges from anywhere between 650 to 850. If you have less than this, here are some ways to boost it.
Don’t Cross the 30% Mark on Credit Utilisation Ratio
Your credit utilisation ratio is the total credit card limit you have used on your credit cards. If this ratio exceeds 30%, lenders will reduce your credit score. Hence, always restrict yourself from using it past the 30% mark. Crossing it occasionally is okay, but your credit score will get affected if it happens frequently.
If you think you need more credit limit, opt for another card. This way, you will not decrease your credit score. Another way to ensure that you do not cross the limit is by customising the credit card limit. For this, you can contact your lender and talk accordingly.
Make Timely Loan and Card Payments
Everything bounds back to making timely repayments. Credit bureaus take repayments seriously. In fact, they are known to give on-time repayments the maximum points. It carries 35% of the overall credit score in your report.
If you delay or miss a payment, it reduces your CIBIL score. Hence, always make it a point to pay credit card bills and loan EMIs on time!
Maintain Old Credit Cards
People have the habit of closing their old credit cards, thinking they will not be important. But that is a completely wrong theory!
You can utilise your old credit cards to lengthen your credit history. When you lengthen this history, it indicates how long you have been using a credit product. This leaves a better impression on the lender as they get an idea of whether you are credible.
Moreover, strong credit history also helps you build a solid credit score. About 10% to 15% of your credit score depends on credit cards, so take advantage of them and maintain your older cards through proper payment history and credit utilisation.
Prefer Longer Tenure Loans
You might think that opting for a short-term personal loan is better since you get rid of the debt earlier. Although that is a benefit, it is better to choose a loan with a longer tenor. It lowers your EMIs, making it easier for you to repay on time. You avoid late or missed payments, improving your CIBIL score.
Don’t Take Too Much Loan at a Time
There is no limit on many loans you can take at a time, but it is preferable to avoid taking too much debt in one go.
When you take one loan at one time, it gets much easier to handle the repayments. You avoid delayed or missed payments and, in this way, manage your credit score. On the other hand, taking multiple loans crashes your credit score. It indicates that you are in major debt and have insufficient funds.
Avoid Applying for a Credit Card Once Rejected
Whether it is a loan or a credit card application, do not reapply within a short time span if it gets rejected once. Because whenever you apply for any credit product, the credit bureaus fetch your credit report. This is known as hard enquiries.
When you make multiple applications, there will be multiple hard enquiries which will dip your credit score. So, try to avoid applying for a credit card or a loan multiple times after rejection.
At the same time, when a lender sees your low CIBIL score, they will further reject your applications. This process keeps moving in a cycle. Hence, it is best not to apply until you improve your score.
Keep Checking Your CIBIL Report
You must keep an eye out for your CIBIL report regularly. This helps in keeping track of your credit score. If you review your report timely, you will notice all the gaps that may reduce the score and work towards improving them. This increases your credit exposure.
Final Thoughts
A poor credit score affects your loan and credit card applications. You will face major rejection when applying for a credit product, further dipping down your CIBIL score. Although this is a huge issue, it is not unrepairable damage! Keep these tips in mind and try to follow them.
Moreover, another thing to note is that these tricks are not quick fixes. You need to wait for months to watch your score bounce back stronger.
Be patient, keep making efforts, get these points right, and watch your score skyrocket!
