If you’re looking to take out a loan, whether it’s for a car, home, personal expenses, education, business, or even just applying for a credit card, the first thing the institution will do is check your CIBIL score. Your CIBIL score shows how good you are at paying back money. CIBIL score can be anywhere from 300 to 900.
If your score is 300, it’s hard to get a loan. But if it’s 750 or more, you can get a loan easily. Let’s say you want a home loan and you submit all the necessary documents to the financial institution. Later, you find out your application was rejected because of your low CIBIL score. What do you do then?
That’s why it’s essential to have a good CIBIL score. Today, we’ll share 7 effective ways to increase CIBIL score from 600 to 750. You might come across a lot of articles online about this, but they might not offer the complete guidance you need.
Without proper guidance, you won’t be able to enhance your CIBIL score. That’s why we’ve conducted comprehensive research to find the best tips for you. If you follow them, you’re sure to see an improvement in your CIBIL score.
Ways to Increase CIBIL Score from 600 to 750:
Pay your bills when they’re due
Keeping up with bill payments is a key factor in maintaining a healthy CIBIL score. By making timely payments, you’ll see an improvement in your score. Some individuals wrongly assume that missing a payment will only lead to a penalty, but it can actually lower your CIBIL score and impact your ability to get loans.
And if your score is low, you might not be able to get a loan. Avoid paying only the minimum amount due, as this can also have a negative effect on your score. Plan ahead and pay your bills before they’re due. Set reminders to avoid missing due dates. Timely payments will enhance your creditworthiness and boost your CIBIL score.
Lower your Credit Utilization Ratio
Credit utilization is the amount of credit you use from your available credit limit. If your credit utilization ratio is higher than 30%, it will negatively impact your CIBIL score. For example, if you have a credit card with a limit of ₹2,00,000 and you spend over ₹60,000, it will negatively impact your score.
This is because a high credit utilization ratio indicates you rely too much on credit. If you spend more than 30% of your credit card limit, try to increase the limit. If you’re not getting a credit card limit increase offer, you could consider applying for a new credit card. Remember, using more credit may not help improve your CIBIL score.
For example, if you have one credit card with a ₹50,000 limit and you spend 30 to 35 thousand rupees, your credit utilization ratio would be 60 to 70%. This suggests that you may not have sufficient funds available to manage your expenses.
Avoid Multiple Credit Inquiries
When you apply for a loan or credit card multiple times, it will result in a hard inquiry that can lower your CIBIL score. If your application is rejected, you will be disappointed about not getting the credit, and your CIBIL score will also be negatively affected.
If you’re thinking about starting a business, buying a car or house, and have sufficient money it’s best to avoid taking out a loan, especially if you already have 4 to 5 debts. Applying for a new loan can result in a hard inquiry and temporarily lower your CIBIL score.
So, it’s best to only get a loan when you really need it. If your loan application is rejected, try to limit reapplying to just 1 or 2 times to avoid further negative impact on your CIBIL score.
Credit Mix (Secured & Unsecured Loans)
It’s important to handle both secured and unsecured loans. Secured loans such as home loans, vehicle loans, and gold loans are one category, while personal loans and credit cards fall under unsecured loans.
Having an excess of secured loans can negatively impact your credit management, just as having too many unsecured loans can. The solution is to have a combination of both types of loans. Lenders will always check your CIBIL score and credit mix when you apply for a loan.
By balancing your credit mix with a combination of secured and unsecured loans, you can increase your chances of loan approval and improve your CIBIL score.
Keep your old accounts open
When you close your old credit accounts, lenders lose the ability to track your credit behaviour. If you have a credit card that you don’t use, it’s better not to close it since your credit history is linked to that card. If you close it, the credit history associated with that card will be removed.
The longer your credit history, the more it will boost your CIBIL score and a longer credit history will also increase your chances of getting a loan approved.
Maintain a good credit history
Your credit history plays a significant role in loan approval. If you have any red flags, like late payments, it can hinder your chances of getting approved. But if you start making timely loan payments, you can improve your credit history over time.
If someone’s credit report has red flags and they want to remove them, they can do that by starting a new credit history. However, it’s not possible to change a bad credit history to a good one in just a few months.
Regular monitor your Credit Report
Keeping an eye on your credit report is key to boosting your CIBIL score. Regularly monitoring your credit report also helps you catch any errors that may be affecting your score. Fixing errors can help improve your CIBIL score. Many people neglect to monitor their CIBIL score frequently. This can lead to errors in their credit report going unnoticed.
This leads them to wonder why their CIBIL score is not going up even though they are making regular loan repayments. The main reason their CIBIL score was not improving was due to their lack of regular credit report monitoring.
Benefits of Having a CIBIL Score of 750 or Higher:
- Higher credit limit.
- Lower interest rates on loans and credit cards.
- Easy to get approval for loans and credit cards.
- Having a high CIBIL score shows that you manage your finances well.
- Raises the possibility of getting approved for higher loan amounts.
Final Thoughts
By following all these methods, you will definitely see an improvement in your CIBIL score within one or two years. Improving the CIBIL score is a skill in itself. The more you handle your finances in a disciplined manner, the higher your CIBIL score will rise. When you are working on increasing your CIBIL score, always remember to repay loans on time.
By following these 7 ways to increase CIBIL score from 600 to 750, you will also find it easier to get loan approval. Many people do not monitor their credit report regularly, due to which sometimes wrong information appears in their credit report, but they are not even aware of this error. Therefore, if you want to improve your CIBIL score, monitoring your credit report is important.
FAQs
Why is a high CIBIL score important?
A high CIBIL score is important because it shows that you manage your finances well and pay your bills on time. It can help you get approved for loans and credit cards, and you might even get lower interest rates.
What is a good CIBIL score?
Having a CIBIL score of 750 or higher is good. You’ll be able to get loans approved more easily, have a higher credit limit, and enjoy lower interest rates.
How long will it take to increase my CIBIL score?
Improvement in your CIBIL score is based on different factors, but typically it can happen within 6 months to 2 years.
What is the first thing I should do to raise my CIBIL score?
To improve your CIBIL score, the initial step you should take is to pay your bills on time.
Will closing old credit accounts improve my CIBIL score?
When you close your old credit accounts, lenders lose the ability to track your credit behaviour. If you have a credit card that you don’t use, it’s better not to close it since your credit history is linked to that card. If you close it, the credit history associated with that card will be removed. The longer your credit history, the more it will boost your CIBIL score and a longer credit history will also increase your chances of getting a loan approved.
