A healthy credit score is crucial to prove your creditworthiness. When you apply for a loan or a credit card, the lender determines your eligibility based on the 3-digit CIBIL score. The loan amount, the rate of interest, and approval of the loan – everything depends on your credit score. The higher the score on a scale of 300-900, the better your chances. However, certain factors, like your payment history and existing financial obligations can adversely affect this score, making it difficult to get a desired loan amount. If your credit score drops below 750, you will need to get it fixed before applying for a loan or credit. Read this article to know how you can maintain a high credit score.
5 Tips to Maintain a High Credit Score
Here are five tips that will help you build a high CIBIL score and improve your chances of getting the loan approved faster –
Never Miss or Delay Payments
If you have an outstanding loan EMI or bills to pay, make sure you clear you have sufficient funds to clear your dues on time. Delaying or defaulting on these payments will not only lead to penalty charges but will also reflect on your credit score. Set a reminder, allocate a portion of your savings to repay the existing loan EMI to keep up with a good credit score.
Limit Your Credit Card Usage
When using a credit card, make sure you do not go overboard. Your credit card usage should not exceed 30% of your monthly limit as it will impact your credit score significantly. Going beyond the credit limit frequently will lead your CIBIL score to drop further below and make the lender perceive you as a risky borrower. Keep a low credit utilization ratio to improve your credit score.
Try Out a Good Mix of Credit
If you want to maintain a high credit score, you must diversify your portfolio by adding a mix of secured and unsecured loans. The type of loan you opt for can make a huge difference to your credit score. Therefore, try getting a secure loan and pay off the unsecured loans at once.
Avoid Multiple Applications
Avoid applying for multiple loans or credit cards within a short span. Every time you send in an application, the lender raises a new enquiry to assess your creditworthiness. A high dependence on credit through multiple applications lowers your credit score. Therefore, try not to apply frequently or at least till you have settled your outstanding dues.
Monitor Your Credit Report
Sometimes, your credit score may drop if there’s any inconsistency or inaccuracy in the credit report. So, it is important that you monitor your CIBIL report at least once or twice a year to maintain a high credit score. If any errors are found, you can immediately raise it and get it solved to improve CIBIL score.
Summary
A good credit score increases the likelihood of you getting faster loan approvals and the most competitive interest rates. Paying a low interest on your loan or credit can help you save a larger sum over a period, which is why it is important to maintain a high credit score. Paying off your dues, keeping a low credit utilization ratio, and having a mixed bag of credit can enhance your CIBIL score. You can always check your CIBIL score online for free and obtain a detailed report to stay updated.
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