Worried about the low CIBIL score? Here’s how you can improve it


Of course, a decent CIBIL score ensures that your loan is sanctioned without any hindrance, but next to that, “banks are offering lucrative interest rates to people with good CIBIL scores. The higher the score, the better the interest rate, ”said Sujata Ahlawat, vice president and head of direct consumer interaction, TransUnion CIBIL, noting that anything above 700 is a decent score. , but that people should aim even higher.

What is the CIBIL score?

The CIBIL score is a three-digit numerical summary of a borrower’s credit history. The score is derived from the credit history found in the CIBIL report and takes into account the credit profile of borrowers over the past 36 months i.e. all types of loans such as home loans, credit cards, personal loans, auto loans, overdraft facilities, etc. one took advantage and the payment history on these.

Here are the factors that determine the CIBIL score

  • Paying off your loan IMEs and credit card bills on time by the due date is most important in maintaining a good credit history and high CIBIL score. A single missed payment can lower your credit score and thus lower your creditworthiness.
  • The second factor in the calculation is the use of credit. For example, if you are using a credit card, it is essential to understand how much you are using it. As a general rule of thumb, your credit usage should be around 30-50%, which means you don’t worry too much.
  • The third factor is the number of requests you have made. Like how often do you look for a loan? Applying for too many of them etc.
  • It is also important to have the right mix of secured and unsecured loans. It is best to have a healthy mix of secured (like a home loan, car loan) and unsecured (like a personal loan, credit cards) loans.

However, if for some reason your CIBIL score is affected, you can still work on improving it. Ahlawat said: “Although it may take time, scores will get back on track if good payment behavior is maintained. “

Here’s how to improve your CIBIL score:

Pay the contributions incurred: The best possible measure to improve your CIBIL score is to pay dues, said Deepak Krishnan, financial planner at Mangrove Wealth. “Maybe the consumer has created a backlog, maybe because they’re going through a rough patch or some other problem; However, once things start to fall into place, start paying dues immediately. “

Then whenever there is extra money, like a bonus, use it to pay off the debts.

Target the highest interest rate first: Second, if you have multiple loans, target the loan with the highest interest rate first, Krishnan said.

Adding to his opinions, Ahlawat said, it’s also worth consolidating loans, in case there are multiple credit card loans and personal loans. Take a single loan to combine them, then pay it back. Many banks and financial institutions offer such services.

Keep EMI amounts at 30% of salary: The client must ensure that the IMEs he pays should not exceed 30% of the salary. “Anything that does more than reduce your financial ability to repay outstanding long-term EMIs,” she added.

Make smaller loan requests: Since the score is already low, the consumer should make sure that they are making fewer loan applications and that the additional credit should be applied very carefully.

Krishnan advocates that all loans – secured or unsecured – should be paid off at the earliest. And the best way to do it, he suggests, aim to invest 10% of the EMI you pay. Then every 3 to 4 years, withdraw the money to partially repay the loan. “This strategy dramatically reduces the loan burden. “

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