Someone’s CIBIL score serves as the bank’s immediate impression; the higher the score, the greater your chances of the loan being examined and authorized.
S Ravi, Former Chairman of BSE, explains, “The choice to lend is entirely up to the bank, and CIBIL has no say in it whether or not the loan or credit card is approved. Banks often consider a score of 650 or above on a scale of 300-900 to be generally acceptable enough to have a loan acceptance without any complications.”
The most important point, experts say, is that any score below 750 would make it difficult for you to obtain credit. Even if your application is granted, the interest rates would most likely be higher. A CIBIL score of less than 650 makes it extremely unlikely that any bank or NBFC will lend you money or approve your credit card application.
Repaying your debts
Repaying your debts or EMIs on time is the best strategy to improve your CIBIL score. As easy as it sounds, a clean record not only looks nice but also positively affects your CIBIL score.
Ravi points out, “Outstanding debts are one of the primary reasons why the majority of people appear to have poor credit. The longer one’s outstanding debts remain unpaid, the greater the influence on one’s CIBIL score. After paying off one’s obligations, one should concentrate on one’s credit card payments and stay within their income restrictions.”
Keep a balanced mix of credit
Similarly, by keeping a balanced mix of credit, according to experts you may simply repair your CIBIL score. This implies you shouldn’t be too eager to cancel your credit cards because your score has dropped. Ravi adds, “most individuals believe that doing so will greatly enhance their CIBIL score, but it serves on the contrary. Having a proper balance of secured and unsecured credit helps one’s credit score.”
Credit utilization ratio
Another important factor that influences your CIBIL score is the credit utilization ratio. “Maintaining a healthy credit utilization ratio is critical – One should use 30 per cent of one’s total amount to avoid penalties,” says Ravi.
Your credit utilization ratio isn’t enough to have credit given to your account; you should use it sensibly while also paying your outstanding on time. Experts say each one of these elements is critical to improving your score.