Learn How to Increase CIBIL Score Quickly in 2023

What is a Good Credit Score? Why is it important?

A good credit score is among the most important indicators of your financial health, and tells lenders about your attitude towards credit. The higher your credit score, the better your chances of getting approval for a new credit card, line of credit, or even a personal loan - especially when you need it most.

In an earlier post, we had mentioned the importance of having a credit score, especially for NTC (New To Credit) consumers, and how to build a credit score.

Why You Have a Low CIBIL Score

1. Delayed or missed payments
If you consistently delay credit card bills or EMIs or haven’t paid them at all, it can lower your credit score.

2. High credit utilization
Your credit utilization ratio is the amount of credit you’re currently using compared to your total available credit. It’s important to maintain a low credit utilization for a great credit score.

3. Default
A default occurs when you fail to pay your credit card bills or loan EMIs for consecutive months. A default can severely affect your credit score and make it difficult for you to get loans or any othe credit product in future.

4. Too many credit applications
Applying for multiple credit products in a short period can also lower your credit score. Each new application invites hard enquiry, which can bring down your credit score.

5. Inaccurate information
Inaccuracies in your credit report such as fake loans, incorrect payment details can damage your score. It’s important to regularly review your credit report and dispute any inaccuracies.

What Factors Contribute to Your Credit Score?

Payment history is the most influential factor of the bureau score. The logic being that if you are not paying your other loans/credit cards, there is a very high chance that you won’t pay back your new ones. Thus, any delinquency reduces the chances of a new loan/credit card drastically. Other factors that make up your score are credit utilisation, credit history, credit mix, and new credit. Read more about factors affecting your credit score.

Additional Read:- Report Errors In Credit Card

7 Ways to Improve Your Cibil Score

Building a credit score is the easier part. Over the years, your usage of credit products determines if your credit score remains high or starts to dip - and that’s where these tips to improve your credit score will come in handy.

1. Make loan and credit card repayment on time

Whether a loan EMI or credit card bill, timely payments are crucial to your credit score, as payment history is the most important ranking factor to calculate your credit score. If you’re forgetful by nature or too busy, set payment reminders for all your outstanding bills and payments, at least 2-3 days in advance of the payment due date, which gives you an additional buffer.

You can also set up automatic bill payments from your bank’s Netbanking option to ensure you do not miss any payments. Most loan EMIs are debited directly from your account as per the mandate you gave the lender, so this reminder will help in ensuring your bank account is sufficiently funded on the EMI date.

2. Keep your credit utilisation low

If you’re someone who likes living life on the edge, this behaviour will severely impact your credit score. Using your credit card to pay for all purchases in order to get discounts, reward points etc is fine, so long as you’re able to repay the entire amount by the payment due date.

However, if you pay only the Minimum Amount Due and keep rolling over the balance to the next month, not only do you incur interest charges but your overall credit utilisation increases.

Try to avoid using beyond 30% of your available credit limit at any time and keep your outstanding balance low across all cards. The lower your credit utilisation, the higher your credit score.

You can also try to request your bank for an increase in the credit limit. If you already have a high credit score, it is possible your bank may also send you an offer saying you’re eligible for a higher limit - and this may lower your credit utilisation. Do note that requesting or accepting the increase in credit limit can have a temporary impact on your credit score, depending on your bank.

3. Get a secured credit card

If you wish to keep using a credit card but repayment of dues is a problem, or you wish to adopt a more disciplined approach, you can get a secured credit card. These credit cards are issued against some form of collateral, generally a Fixed Deposit (FD) held with the issuing bank or financial institution, and have a lower credit limit (usually 75-85% of the collateral amount).

If your previous card/loan applications were declined due to a poor credit score, a secured credit card can help in improving your credit score and credit history - provided you use it responsibly and repay dues in full.

4. Avoid applying for new loans or credit cards unless necessary

Each time you apply for a new loan, line of credit, or a credit card, the lender will access your credit report from one or more credit bureaus. This will be recorded as a “Hard Enquiry”, and too many such hard enquiries can cause your credit score to drop, besides lowering your “credit age”. Apply for a loan or credit card only if absolutely necessary or an emergency.

As a consumer, you can also access your credit score and credit report. This is recorded by the bureaus as a “Soft Enquiry”, and does not affect your score. You can check your FREE credit score from CIBIL and Experian every month on the OneScore app, and this will not affect your credit score.

5. Reporting discrepancies in your credit report

No system is perfect, and it is possible that even with responsible credit behaviour from your side, an error in your credit report could be affecting your credit score.

It is extremely important to check your credit report regularly, as this will help you locate and dispute any errors immediately. In the OneScore app, you can raise a query with the bureau for every item pertaining to any credit product, track the query, and get a resolution from the bureau, once they verify that your concern is valid.

6. Aim for a healthy credit mix

A mix of different credit products is an important ranking factor not just in calculating your credit score, but also in improving your credit score and building a good credit history.

These could be a mix of secured and unsecured loans, credit cards, a line of credit, and so on. This provides an indication of your ability to manage credit in a responsible manner, as well as greater stability, like a home loan.

7. Retain older credit cards

The length of your credit history is another crucial factor in determining your credit score. As you get older and your income increases, there is a tendency to apply for top-end credit cards, and give up the older ones by closing those credit card accounts. However, doing this can affect your credit score.

Even if you apply for new credit cards, try and hold on to your older cards and use them for token purchases once in a while if needed, to keep them active.

How to Improve Your Credit Score After a Loan Settlement?

When a lender decides to settle the loan in a single payment, writing off the interest and penalties, it is called settlement. The amount of settlement is usually lower than total outstanding, and indicates borrower’s inability to repay their debts in full. And hence, it can have a negative effect on your credit score. Settlement can reflect poorly on your CIBIL credit score for up to 7 years. Here are you ways to increase your CIBIL score after settlement.

1. Pay your credit cards bills on time and in full
2. Maintain a low credit utilization ratio
3. Pay off any other outstanding debts
4. Track your credit score regularly
5. Avoid any other new credit enquiries

FAQs

How Can I Increase My CIBIL Score Quickly? Ensure you pay your credit card bills and EMIs on time and in full every month. Set reminders for these payments and track your credit score regularly on OneScore.

1. How Can I Get an 800 CIBIL Score?

   Ensure timely payment, and avoid accumulating debt. Keep your old cards active to maintain length of your credit history and report inaccuracies in your report if any.

2. How Can I Raise My Credit Score in 30 Days?

   Pay off any outstanding debt you may have. Make timely bill payments and use your credit products optimally.

3. Can I Increase My CIBIL Score from 600 to 750?

   Credit score of 750 & above is considered excellent. To achieve a perfect score, ensure your never miss a credit card bill payment or EMI. Keeping your old credit cards active, checking your credit reports from time to time would also help.

💡 Besides checking your FREE CIBIL and Experian credit score and credit report in the OneScore app, you can also use its AI-powered Score Improvement Planner along with personalised tips and suggestions to improve your credit score in 2022. Go on, give it a try!