Your CIBIL score plays a very important role in your loan application process or when you apply for a credit card. A lower score means that the lending institution can deny your application even if you meet all the other eligibility criteria. A lot of people with poor score go to CIBIL score improvement agency and pay a large sum of money to improve their score. However, it is important to know that CIBIL itself is not associated with any such agencies in India. Moreover, these agencies cannot directly make any kind of changes to your credit report.
While a CIBIL score improvement might not be the best option, there are a number of ways in which you yourself can improve CIBIL score. Let us have a look at some of the most effective ways.
1 Make Loan and Credit Card Payments on Time
The most effective way to gradually improve your CIBIL score is by paying EMIs of home loan, car loan, or other types of loan and credit card bills on time. If you have taken a loan and are repaying it through EMIs, opt for ECS facility to make sure that the EMI is automatically debited on time. And if you use credit cards, ensure that you pay the bill at least 5 days before the payment deadline. Use the credit card responsibly and do not spend more than you can afford.
2 Create a Balance between Different Types of Loan
Loans are of two types- Secured and Unsecured. A secured loan, like a home loan, helps in improving CIBIL score as the money is invested in an asset which will appreciate over time. On the other hand, an unsecured loan like a car loan, personal loan, etc. affects your score negatively as they are depreciating assets. So try to create a balance between different types of loans to improve your CIBIL score. It is generally recommended that your loan portfolio should have 70%-80% secured loans and only 30%-20% unsecured loans.
3 Check the Credit Report for Errors
There have also been several instances where banks or other financial institutions fail to report to the credit bureau about the loans or credit card bills that you have already paid. Moreover, the reports they send to the bureau can have errors too. So, make sure that you check your credit report for such errors as they might be negatively affecting your CIBIL score.
Use the tips mentioned above to improve the CIBIL score. Remember that it will take a lot more than a couple of timely payments to see any considerable changes in your CIBIL score. Keep working on your credit portfolio at least for a few months and you’ll surely be able to see the much-awaited improvement.