04-Mar-2016 written by : FSI-Team
Trying to improve the CIBIL score obviously requires focusing on factors that constitute in building the credit score. All aspects of your financial decision making do not have an impact on your CIBIL score so there is no point trying to work on the non related factors. The importance of a good credit score extends beyond its utility in getting a loan application sanctioned. Below are a few ways to help you in improving the credit score.
Anybody trying to improve credit score cannot ignore this mantra. This is by far the most important aspect that contributes to the credit score of an individual and there is no alternative to this option if one aims to get a higher credit rating. If you find that you are forgetful and tend to miss the payment dates then apply for an automatic debit option; for most loans the bankers follow this method only for payments. If you have given post date cheques and the cheques are returned due to non availability of funds then talk to the lender so that the cheques are presented on dates post your salary credits. Keeping your account funded on the date of ECS debit or the date on which the cheque is to be presented is important. If it is a one off situation where you are unable to pay the credit card due then pay the minimum amount due to prevent a negative impact on the credit rating.
A credit rating is all about history; so even old issues like an unpaid credit card due or an education loan you took in your student days which you thought was over could reflect as pending issues in your credit report and pull down the score. Getting a resolution for a pending issue (especially if it’s an old one) may require time, effort and follow ups but there is not short cut here. Removal of any such issue from the credit report could lead to an immediate and visible improvement in the CIBIL score.
Often with passing time the expenditure increases due to obvious reasons like inflation, improving life style and bigger responsibilities. However sometimes we do not realize especially if are using credit cards that we applied for long time back that the credit limit has remained same. This means that even though you pay the dues responsibly every month your credit utilization ratio is high month on month. This is because the credit card use has increased but the limit has remained same over the years. All credit card companies will would like to retain their existing customers, so you could get in touch with the existing card issuer and get a higher limit sanctioned as per their rules or apply for a fresh card to get an overall bigger sanctioned limit. If getting a fresh card remember to distribute your expenses between both (or more) cards. This option must be exercised only when you are able to comfortably meet your existing monthly credit card payments. It cannot be a solution if the ratio is high because of uncontrolled spending on the card.
This requires that you go through the credit report in detail to see if there are any discrepancies in your report. Since CIBIL just collects the data and then scores you accordingly, if an erroneous reporting is made to it, the rating agency has no way of knowing if it is the fact or not. The errors could be a wrong reporting of an open loan, dishonored cheque when the bank was at fault, a loan which is not yours and so on. In case you are wondering how to correct CIBIL report, the CIBIL website lists out the steps and the form too that needs to be filled to remove the error.
Though I feel nobody will apply for a loan unless they need it but apply only when you are sure that you meet the eligibility criteria of the lender. Check the criteria mentioned on the website or with the concerned bank branch and also check about the required documents. When you apply for a loan the bank runs a credit check (CIBIL score check) which is termed as a hard enquiry, too many hard enquiries impact the credit score. So if you are not sure if the loan will be sanctioned do not apply for it as it will save your score being affected negatively.
Work on these factors to get a healthy credit rating. There are many ways to get a better score, however the above ones work best because the address the core issues that contribute to a credit score.