5 Effective Tips to Maintain Your Credit Score - Loan Trivia

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Thursday, 21 November 2019

5 Effective Tips to Maintain Your Credit Score

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Based on your credit repayments, CIBIL, a credit rating agency, assigns you a credit score or CIBIL score that ranges from 300 to 900. 

What is CIBIL Score? 

This score is a snapshot of your creditworthiness and impacts the terms on which you get a loan. A CIBIL score of 750 and above is considered good and symbolises that you have been regular with the repayment of your EMIs and dues and have experience with borrowing credit in the past. 

With a bad score, on the other hand, you pose a risk of default from a lender’s perspective. It means that you may either have defaulted on your credit payments or delayed them in the past. A low CIBIL score may also mean that you have no or less experience with credit in the past. To make up for this risk, lenders may either charge higher interest rates, offer you a lower loan amount than what you wanted, or even reject your loan application. Given its importance, you may be trying to figure out ways to maintain a good credit score or ways to get a raise on credit score instantly. Read on to find out! 

Pay Your Debts On Time and in Full 

When you fail to pay your credit card bills on time, the outstanding amount attracts the applicable interest rate, which is added to your next bill. Your credit card debt can further pile up if you pay just the minimum balance. When you do this, though you eliminate paying a late penalty, you still attract interest on the remaining balance. If this trend continues, you will soon be caught in a whirlpool of debt. To avoid this, pay your bill in full and on time. Spend what you can repay and if needed, set automatic payment instructions so that your bills are settled before you use the funds elsewhere. This will help you improve your CIBIL score and maintain it consistently. 
Must Read: How To Get a Personal Loan When Your CIBIL Score is Low

Maintain Low Credit Utilisation Ratio 

Credit card issuers offer a credit limit based on your income. The percentage of the credit limit that you use as against the total limit is called the credit utilization ratio. Maintaining a low credit utilization ratio adds to your credit score. So, ensure that you either ask for an increase your credit limit when you have higher payments to make, or use your credit card for certain expenses only. This will help you maintain a high credit score. 

Keep Your Old Credit Card Accounts Open 

Your credit score is a summary of all your past repayments, which means even your oldest debts are associated with it. When you close an old credit card towards which you had made regular payments, the associated good history is erased and your credit score dips in the short run. So, refrain from closing them. Instead, close the ones against which you have bad repayment records. This, way you can clean your credit history and maintain your credit score. 

Limit Your Applications For New Credit 

Issuers these days give exciting offers on credit cards and loans and so, you may be tempted to apply for one. However, by using multiple credit cards you run a risk of mismanaging them. With an immense overall credit limit, you may end up overspending. If you are financially unfit to pay multiple card bills, you may accumulate hefty bills and land yourself in a debt trap. This lowers your CIBIL score too. 

By applying for loans without having a reason in mind, your credit score dips as a hard inquiry is made against your name with a credit bureau like CIBIL. So, apply for loans only when absolutely necessary and borrow only what you can repay. Do check loan eligibility criteria set out by lenders to ensure you qualify for the loan. Then, when your application is approved and you pay EMIs on time, your CIBIL score improves and you can maintain it by making payments consistently. 

Keep An Eye On Your Credit Report 

Since your credit report records each and every payment that you make against your debts, it is a good habit to keep an eye on it. This way, you can monitor the progress of building your credit score and identify identity thefts and fraudulent transactions that may harm your credit profile. Also, if your credit report has any errors, you can request the agency to fix it well in time to bring your score back on track. 

How to Calculate CIBIL Score 

CIBIL considers various parameters to calculate your CIBIL score including your payment history. In fact, it gives as much as 35% weightage to your repayment history. Other factors include: 
  • Your total credit balance available 
  • Quantum of your unsecured and secured loans 
  • Total number of credit cards and loans you hold 
  • Your credit utilization 

It then uses an algorithm to calculate your credit score. 

How to Raise Your CIBIL Score? 

If you are looking for ways to raise your credit scores in a month, one thing you should always remember is that that even one unpaid due on your credit card bill or one delayed EMI can lower your credit score by 100 points. Keeping this in mind, you can raise your credit score in just 30 days by paying off any debt you may have, by applying for a new credit card with a high credit limit or by increasing the credit limit on your credit card. 

If you don’t have a credit score and want to build it, avail an affordable Bajaj Finserv personal loan and service it on time. Consider availing a personal loan from top lenders like Bajaj Finserv to access the loan on simple eligibility criteria, minimal documentation, and enjoy quick approval and disbursal within 24 hours. This way, you can start building your credit score without any delay and enjoy the benefits of good CIBIL score

Now that you know what to do when your CIBIL score is getting you down, go on and work on improving it. Failing to do so may limit your access to affordable credit in times of need.
Must Read: Interesting Facts Related to CIBIL Score

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