A credit score (CIBIL Score) is a three-digit number assigned by a credit agency to individual. The credit score is important while taking a loan. As an when you apply for the loan bank checks your credit score to verify your creditworthiness. The amount of loan, interest rates and terms of the loan will be determined from your credit score. If you want to know more about credit score and understand how to improve credit score, you are at the right place. In this post, I will share 10 different ways to improve your credit score. All these tips and tricks are proven and already used by me.
What is Credit Score?
A credit score is a three-digit numeric number ranging from 300 to 900. This score is assigned by credit agencies. In India, RBI has authorized four different credit bureaus to assign a credit score.
- CIBIL – Credit Information Bureau India Limited
- CRISIL – Credit Rating Information Services of India Limited
As per RBI mandate, you can receive a free credit score report once per year. You can request at the portal of any of credit agencies to provide your credit report. Your credit report contains your credit score, credit history, loan prepayment and default details. The credit score is in the range of 300 to 900. Higher the credit score better is your chance to get a loan. The credit score above 720 is considered a good score.
Credit agencies decide your credit score based on the following factors.
- 30% of your score is determined by your past payment history, over-dues, and defaults.
- 25% of your score is determined by a mix of secure and unsecured loan taken by you.
- 25% of the score is decided based on your credit utilization ratio. Higher the ratio lower is your score.
- 20% is decided based on number of loan on your name and frequency of loan applications.
After understanding credit score let’s take a look at how to check credit score?
Also Read – Top 5 Popular Premium Credit Cards in India
How to get Free Credit Score Report?
Follow the steps given below to get your Free Credit score report using CIBIL.
- Visit CIBIL website and click on “Get Your CIBIL Score” link given on the website.
- You will be asked to create new login by entering username and password. You also need to provide additional information such as email id and mobile number.
- Next step is to provide your personal information such as date of birth, PAN card number and Aadhaar card number.
- OTP will be sent on your mobile number. You need to enter OTP received on your mobile number to get CIBIL credit report.
- Your credit report will be displayed on screen as well as sent to you via e-mail.
If you have already registered, you can skip the steps given above and directly login via member login.
10 Ways to Improve your Credit score
- Clear your dues on time
Make sure to clear all your dues on time. Delay in making credit card payment or EMI payment adversely affects your credit score. In case you are not good at remembering things, make use of automatic bill payment service or reminder service. Clearing your dues on time will surely help in increasing your credit score.
- Pay off Debt
Pay off your debt before time. If you clear your debt before timeline it will help in improving your credit score. Clearing your dues means increasing your creditworthiness. As you clear your dues it will improve your credit utilization ratio and in turn it will improve your credit score.
- Don’t Apply for Multiple Loans at same time
One important point which you need to consider is don’t apply for loan at multiple banks. Do your research and apply for few banks for the loan. Applying at multiple banks for loan will be taken as negatively while deciding your credit score.
- Apply for credit within limit
When you apply for loan or credit make sure to apply within limit. Don’t give impression that you are constant need of credit. Apply for credit only when you need it and you can repay it. Too much loan is risky for your finance as well as credit score.
- Opt for Secure as well as unsecured Loans
In order to improve credit score you should opt for secure as well as unsecured loans. You should have secure credit such as home loan as well as credit card or personal loan.
- Get a Credit Card
If you don’t have credit card you should opt for one. Getting a credit card means opting for unsecured credit. It is one of the best and proven way to improve your credit score.
- Open a Secured Credit Card
If you are not getting credit card it is good idea to opt for secured credit card. Secured credit card is given on fixed deposit. Opting for secured credit card is another step towards improving your credit score.
- Accept offer to enhance the credit limit of your credit card
If you are getting any offer from bank or credit card company to enhance your credit limit you should opt for the same. Larger credit limit means reduction in credit utilization percentage. This will help in improving your score.
- Opt for Longer duration loan
You should opt for longer duration loan. If you opt for longer duration loan your EMI will be low and you will be in better position to pay EMI on time. This trick will surely help you to increase your credit limit.
- Don’t become guarantor for someone’s loan
A small but important point to remember in order to improve your credit score is don’t become a guarantor for someone’s loan. Few banks lower your credit limit based on this fact.