Many of us, at some point in life, need to take a loan for a home, car or for meeting other needs. But to get a loan or credit card, it is very important to have a good CIBIL score. A good CIBIL score helps you get a loan at low-interest rates and easily. There are many reasons due to which your CIBIL score can be bad. Today in this article we will tell you about the reasons behind poor credit scores and how it can be improved.
Reasons that deteriorate your CIBIL score
- If you have taken a loan from the bank and do not pay it on time, then your credit score will get worse or lower.
- If you have a credit card and you do not pay the bill on time, then it will have an adverse effect on your credit score.
- Your credit score suffers even if you do not maintain the minimum balance in your bank account or have a minus balance in it.
- Using your full credit limit or over-dependency on credit also affects your CIBIL.
- Moreover, doing multiple loan enquiries also contribute to the deterioration of your CIBIL.
- Checking your CIBIL frequently also reduces your credit score.
How to improve your credit score?
The CIBIL score ranges from 300 to 900. If the score is 750 or above then it becomes easy to get a loan. The better the CIBIL score is, the easier one can get the loan. The CIBIL score is based on the credit history of 24 months.
30% of your CIBIL score depends on whether you are repaying the loan on time or not. 25% on secured or unsecured loans, 25% on credit exposure and 20% on loan utilization. Based on this, here are some tips to improve your credit score.
Read more: How To Get Loan Against Property
Pay EMIs and Credit Bills on time
Loans or any other EMIs and credit card dues must be repaid well in advance. If you maintain this habit then your credit score will improve. This has a huge impact on CIBIL.
Use of credit limit
When you take a credit card, there is a spending limit. This is called the credit limit. To maintain a good CIBIL score, it is important that not more than 30% of the credit limit is used. If you spend more than this limit on your credit card, then you are seen as a person who depends totally on credit. This negatively impacts your CIBIL score.
Taking loans is necessary
A person who has a good record of repayment of loans, his credit score remains good. In such a situation, if you have not taken any loan yet, then you can take a loan for your needs, even after returning it on time, your CIBIL score will improve. To have a good CIBIL score, it is important to have a good loan history. This can include different types of loans, secured or unsecured, short term or long term.
Use of credit cards
You should avoid closing your credit card account. Keep shopping with it and keep paying bills. Apart from this, you should constantly review your joint account accounts, CIBIL score.
If you follow all the do’s and don’ts mentioned here, your credit score will improve eventually.