Financial advisors are often heard quoting,’ Higher CIBIL score is a ticket to bargaining for interest rates’ But is that true, is it possible to increase the CIBIL score, If yes, then how? This article will answer all such queries, and if you traversed with us till the end of the article you will get well versed with almost everything related to CIBIL,
let’s get started.
What is CIBIL?
A CIBIL is the quantified assessment of the creditworthiness based on the financial records of the person. It presents the credit standing based on the repayment record of credit cards, loans etc. taken from banks and non-banking institutions. CIBIL is calculated using the track record of past payments, debt to income ratio, type of loan taken, the utilization of credit cards and various similar factors. The high credit score shows that the individual is diligent enough and is worth getting a loan. So, yes high CIBIL score fetches loan at a lower rate of interest.
Top credit rating agencies in India: The four credit rating agencies which in India are:
- TransUnion CIBIL
What is a high CIBIL Score?
- 750 and above: Outstanding credit
- 700 – 750: Appropriate credit
- 600 – 700: Average credit
- 0-600: Lowest credit
Yes, it is possible to increase the credit score, lets deep dive into steps to improve the credit score:
How to improve credit score
- Individuals should refrain from making multiple inquiries as it indicates that you are hungry for the credit.
- Individuals must keep a mix of secured and unsecured credits to maintain a good credit score; too many unsecured loans can affect your credit score.
- Individuals must maintain a credit utilization ratio below 30% to ameliorate their credit score.
- Individuals, who have bad credit scores must also avail a credit card to improve their credit score?
- Maintaining an old credit card helps individuals to maintain a good credit score. If one gets rid of credit cards very fast, then it may deter chances of better credit score.
- The perfect way to optimize the credit score is by timely payments of the credit card bills.
Misconceptions related to credit cards
- If individuals don’t avail any credit, they will have a good credit score. However, having a zero credit history means that the lending institutions may hesitate to provide one with any credit because of lack of credit history.
- If an individual has a poor credit score today does not mean that you will have the same credit score always. Your credit score keeps on changing as you take any credit.
- If individuals have already received many loans from multiple institutions, then the banks may be reluctant to provide one with the credit as they already own a substantial debt. It is thus important that one doesn’t max out your credit cards.
- If individuals check their credit score, then it is known as a soft enquiry, and it does not present on the credit reports or affects your credit score.