Top 5 CIBIL Score Improvement Factors

New Delhi [India] : Your credit approval or rejection depends on your CIBIL score. A good credit score opens the door to better interest rates and more favourable loan terms, and vice versa. If your CIBIL score is below 750, you must take steps to improve it. But first, let’s check the 5 factors affecting your credit score negatively. Come take a look!

5 Factors Affecting Your Credit Score Negatively

Several factors can adversely impact your CIBIL score, including:

1. Late Payments

It is important to pay bills and EMIs on time. Even a single late payment can significantly lower your credit score. So, make sure you set up auto payments or reminders to avoid missing the due date.

2. High Credit Utilisation

Using a large portion of your credit limit indicates a high dependency on credit, which can negatively affect your score. A credit utilisation ratio of 30% of your credit limit shows that you manage your credit well and are not overly reliant on it.

3. Multiple Loan Applications

Applying for multiple loans or credit cards within a short period can make you appear credit-hungry and risky to lenders. Avoid applying for multiple loans or credit cards in a short span, as each application results in a hard enquiry, which can temporarily lower your score.

4. High Outstanding Debt

Carrying large balances on your credit cards and loans can lower your credit score, indicating financial stress. Consider consolidating them into a single loan with a lower interest rate. This simplifies your repayment process and can improve your credit score over time.

5. Limited Credit History

A short credit history or no credit history can make it challenging for the credit bureau to assess your creditworthiness accurately. If you have any old credit accounts, keep them open so lenders can access your creditworthiness.

These are the 5 factors that might affect your credit score. But what should you do to manage your credit score and credit report? Let’s find out in the next section.

Tips to Manage Your Credit Score and Credit Report

Effective management of your credit score and report is essential for maintaining good financial health. Here are some tips:

1. Review Your Credit Report Annually

Ensure that there are no errors or fraudulent activities impacting your score. In case you find any inaccuracies, raise a dispute.

2. Opt for Longer Loan Tenures

Choosing longer loan tenures can result in lower EMIs, making it easier to manage timely payments without straining your finances.

3. Consolidate Your Debts

If you have multiple loans, consolidate them into a single loan with a lower interest rate. This simplifies your repayment process and can improve your credit score over time.

4. Avoid Closing Old Credit Accounts

Closing old credit accounts can reduce your overall credit limit and impact your credit history length. Keep them open, especially if they have a good repayment history.

5. Seek Professional Advice

If you're struggling with debt management or improving your credit score, seek advice from financial advisors or credit counselling services.

To Conclude

Maintaining a healthy CIBIL score is a continuous process that requires diligence and responsible financial behaviour. By following these tips and understanding the key factors that influence your score, you can improve your creditworthiness and secure better financial opportunities. Regularly checking your CIBIL score online and taking proactive steps to manage your credit can pave the way for a strong financial future.

Remember, a good CIBIL score is not just a number; it's a gateway to achieving your financial goals with ease and confidence.

(No Hans India Journalist was involved in creation of this content)