We have several personal needs and dreams and realising them can cost a fortune and challenging to accomplish on your own. A good credit score can facilitate the loan application process of the desired amount. The loan amount may be required for fulfilling your financial requirements such as buying a new house or a shiny new car or travelling across the world.
To get your loan applications approved and avail them at reasonable interest rates, you need a healthy credit score. Building a good credit score is reasonably simple if you understand the factors that go into its making and take conscious efforts in its direction. Let us look at the steps you can adopt to improve your credit score.
What is a Credit Score?
In India, the credit score is maintained by CIBIL, which records all your credit-related activities. For this reason, credit score and CIBIL score are often used interchangeably.
A credit score is a three-digit number that indicates your past credit behaviour. It is based on your credit report that contains all your loan and credit card applications and previous repayment records. Any rejected applications also get recorded into your CIBIL report.
The CIBIL score typically varies between 300 and 900 and a high score denotes a good credit history. The closer you are to 900, the higher are your chances of credit approvals.
Lenders like to consider this score before approving any credit applications. They extrapolate your past financial behaviour to ascertain your intent of repayment. This is their way to ensure that the money is going into safe hands and will be returned in due course of time.
How is CIBIL Score Calculated?
CIBIL uses the below metrics to arrive at your credit score.
25% credit exposure
30% past performance
25% credit type and duration
20% of other factors
What Are The Benefits of a Good CIBIL Score?
A healthy CIBIL score can work in your favour in more ways than one. Firstly, it ensures that your credit card and loans applications get approved. Secondly, lenders may expedite your request to liaise with a good customer. Lastly, it allows you to negotiate for better interest rates. A good bargain can sweeten your deal and reduce your financial obligations. You can even ask for waivers on processing fees and other charges.
How Can You Raise Your CIBIL Score in 30 days?
It is disheartening to have your loan application rejected because of a low credit score. However, you can enhance your CIBIL score in 30 days and apply again. Here is how you can do it.
Check Your Credit Report - It is a good idea to check free CIBIL score frequently. You can detect any errors or misrepresentation of data reflecting in your report. It is mandatory for financial institutions to correct such mistakes within 30 days. Secondly, you will be able to see any delayed or missed payments captured in your statement. In such situations, you can approach your bank or lender and get it removed.
Clear Your Dues - Repaying your outstanding credit card and loans can drastically improve your CIBIL score. Clear your credit card dues before the last date to refine your CIBIL score. You may try setting up reminders for this purpose. It is also advisable to clear your existing loans if it is within your means.
Do Not Close Your Paid Accounts - Try to keep your good credit card or loan accounts open for as long as you can. Good accounts essentially mean specific credit lines where you were diligent with your repayments and adhered to the timelines. Such accounts can help in improving your CIBIL score.
Do Not Apply For Fresh Loans - All your applications for loans and credit cards reflect on your CIBIL report. It is a good idea to refrain from new credit applications during this time to improve your credit score.
To improve your credit score instantly, you can read a detailed guide here. Follow these simple ways to build a healthy credit score and get your loan applications approved. A good credit score can get you loans quicker and with better interest rates.
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