When you apply for a loan or credit card, banks check several factors to approve your request. One of those factors is the CIBIL score. It is one of the most important parameters to determine whether you qualify for a loan or a credit card. This three-digit number reflects your creditworthiness. Banks check the CIBIL scores to determine the terms of the loans and approve your loan or credit card application.
With a high CIBIL score, you can get your loan and credit card applications at better interest rates. Having a CIBIL score between 750 and 900 is considered a good score, according to the researchers. BankBazaar. However, having a low credit score can lead to unfavorable terms on your loan or rejection of your application.
3. Clearing up contributions: Make sure you pay all your contributions on time. Failure to do so will negatively impact your credit report, lowering your CIBIL score. Paying your dues on time shows that you are a disciplined borrower, giving banks the confidence to extend credit.
4. Minimum amount due: It is a fraction of the outstanding amount that must be paid on your credit card bill each month to avoid late payment fees. If you only pay this amount, your debt may increase over time due to costs such as interest charges on the remaining amount. Therefore, it is essential to pay your credit card bills in full to avoid additional charges.
5. Apply for multiple credit cards: When you apply for a credit card, a bank makes a difficult investigation to determine whether you qualify for a card. A hard question temporarily lowers your CIBIL score. Applying for multiple credit cards would mean that the banks will make multiple hard inquiries, which can significantly lower your CIBIL score.
6. CIBIL Report: A CIBIL report shows the details of your previous and current credit accounts. Any error in this report may impact your CIBIL score. Check your CIBIL report regularly, check for errors and report them to the banks for correction.
7. Length of credit history: The credit history shows the history of transactions since you opened the account. If you have a longer credit history, banks may scrutinize your repayment activity.
8. Lack of credit mix: If you have a good mix of different credit options, banks believe that you can handle different types of credit better. Having a healthy credit mix has a positive impact on your CIBIL score.
9. Don’t close old credit card accounts: Closing an old credit card account erases the long credit history associated with the card. If you’ve had a credit card for a long time, don’t consider closing the account; However, you can close the account for new credit cards as the credit history is relatively shorter.
10. Debt to Income Ratio: This ratio shows the portion of your income that goes toward paying off debts. Having a high debt-to-income ratio indicates greater dependence on borrowed money. This shows that your current income is insufficient to obtain a new credit. However, if you have a low debt-to-income ratio, it means that a smaller portion of your income is going toward debt. This improves your credit score and increases your chances of getting loans or credit cards.
In short, a CIBIL score is very important in assessing your eligibility for credit. Therefore, it is very important to maintain a good score to get hassle-free loans and credit cards. One of the essential steps to improve your CIBIL score is to pay your dues on time.
