TransUnion CIBIL is India’s largest credit information company which maintains credit records of over 550 million individuals and businesses. When we apply for a loan with a bank or a lending institution, our CIBIL score is retrieved by the institution. This score is based on our credit exposure, past performance of repaying loans, credit type, duration and a few other factors. A bad CIBIL score effectively means that most banks and financial institutions will refrain from offering loans. Hence, it is important to ensure that we handle credit responsibly.
However, there can be instances where you might have defaulted on a payment, negatively affecting your CIBIL score. If that is the case, then you must immediately endeavour to increase the score so that you can avail a loan or credit in times of emergency. In this article, we will talk about some ways in which you can increase your CIBIL score.
Before we start
Before you start working towards increasing your CIBIL score, it is important to understand the aspects that can negatively affect your score and those which can increase it.
All late payments and/or defaults can have a negative impact on your CIBIL score. Also, too many applications for credit (loans or credit cards) are not healthy for your creditworthiness.
On the other hand, regular and timely payments of loans and credit cards can boost your score. Also, the number of loans and credit cards held by you can help you increase it further.
Now, let’s look at some ways in which you can increase your CIBIL score:
Although it sounds logical, we know many people who have a bad credit score but hold a few fixed deposits. The problem is, many people don’t understand the importance of having a good credit score. If your score is low and you are holding deposits / investments, then you might want to consider taking a loan against the deposit and clearing the credit card / personal loan.
Remember, your score will be negatively impacted for every month that you have an unpaid outstanding amount.
TransUnion CIBIL allows you to purchase your CIR for Rs 550. Buy it and study it well to understand how you can improve your score. Also, according to CIBIL, CIRs are known to have two major issues:
CIBIL offers some guidelines to help you repair your credit score for any of the reasons mentioned above.
If you have an old credit card which you have managed well, i.e. no delays or defaults, then this can be a handy tool to increase your CIBIL score. Use this card intermittently and ensure that your repay the amount used. A long-standing credit card with a clear repayment record can go a long way in improving your credit score.
Many times, credit card issuers offer credit limit enhancements to regular customers. While many of us deny the enhancement to be able to keep a tab on the credit we utilize, it is wiser to accept the enhanced credit limit as it shows the confidence bestowed upon you by the bank. However, you need to ensure that you keep your credit card utilization under 30% as it displays financial discipline.
The best way to increase your CIBIL score is to take a loan and repay it in a timely manner. Now, the problem is that if you have a poor CIBIL score, then most banks won’t offer a loan. This is where a Peer to Peer platform comes in.
Introduced to India around five years back, Peer to Peer lending platforms accept applicants with a poor CIBIL score if they can provide a valid reason for delays or defaults in the past and help establish their creditworthiness. People Lend, one of the trusted names in P2P Lending, has a proprietary software which helps it assess the creditworthiness of prospective borrowers depending on a wide range of factors.
You can get a small personal loan from People Lend and repay it in instalments. You can also pre-pay the loan.
If you need funds during an emergency, a bad CIBIL score can act as a huge deterrent. It is important that you increase your score when you are not in need of funds. Use any of the tops given above and give your credit rating a good boost.