By Sidharth V, CRO, KreditBee
A strong credit score is more than just a number used by creditors to assess a borrower’s creditworthiness. It is a key component of one’s financial profile and shows whether or not they have a sound credit history. One sort of credit score that lenders look at before approving loan applications is a person’s CIBIL score. Lenders determine the terms to offer loans based on this evaluation, and candidates with a high CIBIL score generally get favorable terms.
While there is no way one can fix their credit score overnight, here are a few steps they can take to see a gradual improvement in their credit score over time.
Maintain a strong repayment history
A person’s CIBIL score is negatively impacted by late payments for loan EMIs or credit card dues. Moreover, they get recorded in history, where other lenders can review them and determine that the borrower is risky. One needs to budget and plan appropriately to prevent this. Ensuring that EMIs and payments are within one’s budget is a smart place to start. Second, one must make sure their payment accounts have enough money in them so that automated payments can happen without any problems. In this manner, one can avoid defaults on their credit report and not miss their due dates.
Use your old credit cards
Utilising an old credit card with a solid track record of on-time payments can help one raise their CIBIL score. Thus, one should maintain their oldest active credit accounts well if they want to increase their CIBIL Score.
Don’t submit multiple credit applications
Submitting multiple credit applications over a short period of time can harm one’s credit score. Lenders see this as credit-hungry behavior because these are documented as hard queries. One must wait at least a few months between applications and only apply for new credit if they absolutely need the money. This gives one plenty of opportunity to raise their score and, thus, their eligibility.
Monitor the loans with a co-applicant
When one signs up as a co-applicant for a loan, they and the other applicants jointly bear the cost of servicing the loan. Consequently, they even share responsibility for late or missed payments. So, as the non-payment of other co-applicants will also have an impact on one’s credit score, it is critical to maintain track of such loans and ensure that other co-applicants are paying their portion of the EMIs.
Check your credit score
Once each year, an individual is entitled to a Free Credit Score. However, if they have lately accumulated more debt, they must get a new one to determine whether and by how much their credit score has changed. And if one finds any discrepancies or errors, they must bring them to the credit bureau’s attention right away so that the same can be rectified as soon as possible.
To put it briefly, one can use the aforementioned strategies and concentrate on gradually raising their CIBIL score because even though credit score is not the sole factor that determines approval of an application, it is one of the main requirements for availing of new credit.