You often hear that when few people when learning about their low credit scores, much to their surprise wonder why are their scores low. Also, they wonder when they apply for HDFC or IIFL loans through the online platform, why is HDFC CIBIL score or IIFL CIBIL score given high value to decide your eligibility for the loan and applicable interest rate. From here, it must be clear that approvals take place based on your credit score.
The score is determined based on your spending history and previous credit card score. A good score is necessary for getting swift and simple loan approvals on loans of your choice may it be an auto loan or a business loan. You can check your credit score through CIBIL. CIBIL stands for Credit Information Bureau Limited is one of the leading companies that computes your credit score based on your credit info and history details. The common reason for low score includes delay in bill clearance, higher credit limits or a lot of credit card outstanding dues. If you are looking to find an answer to how you must improve your credit score, you are at the right place.
Keep thorough track of your expenses on your credit card –
It is very natural for you as an individual to give in purchasing impulsively, particularly when you are attracted by a lot of discounts and offers. Any amount spent on a credit card at any specific point must be repaid and having this in your mind must be the reason enough to not surpass your limits. Budgeting your expenses responsibly can assist in such a scenario. Even if your score has fallen, a controlled and consistent spending habit for a thoroughly continued stretch of 3 to 4 months must add some positive points to your credit score.
Paying the utilities and bills on time –
Nowadays, many of places provide cash back, special discounts, and other crucial offers when you make a payment on other online portals like e-commerce sites and for clearing the utilities and bills. A common tip on enhancing your credit score by use of a credit card is to use it just as per your repayment capacity and ensure to clear off the bills in full on time. Utilities would include payments made on phone bills, electricity, or water bills. Expenses incurred on these payments are generally lower but assist in building a positive score because you are clearing your outstanding bills instead of making any new buys.
Also Check: IIFL CIBIL Score
Making repayments on time –
It is one of the crucial tips you must ensure to consider if you want to ameliorate or maintain a strong score. All credit cards come with a minimum payment amount that must be repaid by the due date every month. Even if you have lower funds, ensure that you are at least able to clear off the minimum amount due for every month. For a quicker process of ameliorating your credit score, try to repay any outstanding dues in place of barely mitigating the minimum.
Contain a CUR (credit utilisation ratio) of under 30 per cent –
This ratio refers to the percentage of the overall credit card limit used by you. Generally, lenders prefer lending those with a credit utilisation of within 30 per cent. They consider those with a higher CUR as credit hungry. Credit bureaus lower the score on enhancing the 30 per cent limit while those with a lower ratio scored way higher. Hence, always aim to limit your CUR within 30 per cent. Request for an enhancement in credit card limit from your existing card issuer if your CUR tends to be over 30 per cent. Alternatively, you can also apply for another credit card to increase your overall credit card limit.
Avoid submitting multiple credit card applications in a short time span –
Registering multiple credit card applications in a short time span tends to pull down your score by some points. Whenever you make an application for a credit card, the credit card issuer fetches your report from the credit bureau to assess your credibility. This is looked upon as a hard enquiry and this shows up in your report and each of such hard enquiries lowers your score. Instead of making a direct application with several credit card issuers, ensure to visit an online marketplace to strike a comparison among distinct credit card deals and offers. While they may even fetch your score, such request is termed as soft enquiries and hence has no impact on your score.
Carefully close your previous credit cards –
Credit bureaus consider the average credit facilities’ age including the loans and credit cards while computing your score. Hence, closing your previous cards will lower the average length of credit facilities, which may make you as a borrower lower your score too. Additionally, closing your card can even lower your overall credit card limit. If lowered credit card limit makes the CUR to exceed the 30 per cent mark, it can lower your score. To lower the impact of score from card closure, ensure to request the other card issuers to enhance your credit card limit.
Try maintaining a good mix of credit –
It is recommended to hold a good mix of secured loans like home loans, and auto loans and unsecured loans like personal loans, credit cards, etc. If you are one of those with a higher number of secured credit options by lenders, then the credit bureau may even endow a good credit rating. If you hold several unsecured credit options than secured ones, ensure to prepay your unsecured credit options to maintain a good mix of credit.
Say no to joint account holding –
Avoid being a joint account holder or loan guarantor as any kind of default from another party will even get reflected on your score.
Get a secured credit card –
If you get any secured credit card from financial institutions like Axis bank, ICICI bank, State Bank of India, etc. against an FD (fixed deposit) and repay the outstanding by the due date, then you have a high chance of increasing your credit card.