Your credit history is summarised in a report, based on which
your credit score is determined. In India, TransUnion CIBIL is a
popular agency when it comes to checking someoneʼs credit
score. Your credit score would be somewhere between 300
and 900, where the higher is the better. A score of at least 550
is required to ensure that your credit score is above average,
while anything below would be poor. Hereʼs how you can
improve your CIBIL score,
Set EMIs as per your affordability – While disbursing a loan,
your lender is likely to offer you multiple loan tenor options.
Longer the tenor higher would be your interest cost, but lower
would be your EMI. You must strike a balance between the
interest you want to bear and the EMI you are most
comfortable with. Going for a shorter loan tenor just to keep
the interest cost low can lead to higher EMIs. With high EMIs
the probability of a default increases. Therefore, optimise your
loan tenor and EMI amount so that you can repay it timely.
Discipline in repayment – Default in loan repayment can not only attract penalty but also bring down your CIBIL score.
Similarly, timely payment regularly can do wonders for your credit score. To build a good credit score, make sure you set EMI reminders and pay your credit card bills and loans on or
before the due date.
Pay heed to your credit limit – You will have a pre-decided
credit limit against your cards. You should always transact
within this set limit. Exceeding your credit limit can lower your
CIBIL score. If your expenses often borders around your credit
limit, you can get in touch with your lender and request an
increase in your credit limit.
Review your debt situation – Excessive loan burden can affect
your repayment capacity. Maintaining multiple loan accounts
at the same time would result in several EMIs coinciding each
month. On a particularly bad month, you may fail to repay one
or more of your EMIs, leading to a negative effect on the credit
score. Ideally, repay a loan completely before applying for a
fresh one. This will keep your credit history ticking and your
CIBIL score high.
Diversify your credit history – Not having any loan history will
keep your credit score low as you wonʼt have any repayment
history. Inversely, you can build a more diverse credit track
record by availing different types of loans. If you have
consistently repaid loans of short tenor and long tenor, and
secured and unsecured loans your repayment record would
seem more credible, irrespective of the loan type. For a young
loan applicant with limited affordability, it could mean
maintaining a credit card, repaying a small personal loan, a
two-wheeler loan, or a personal car loan etc.
Build credit legacy – Credit card companies offer excellent
deals and offers all the time. However, to build a good CIBIL
score you should stick to your older credit cards and transact
with them whenever possible. Timely payment against your
old credit cards becomes a part of your strong and enduring
credit history, thus increasing your credibility.
Review your CIBIL score – By regularly reviewing your CIBIL
score you can identify and report anomalies in your credit
records. Any information not recorded in your credit history, or
incorrectly recorded should be reported by submitting a CIBIL
Dispute Resolution Form. Incorrect information can reduce
your CIBIL score and by reviewing it regularly you can make
sure that you are not leaving anything to chance.
Apart from building a strong CIBIL score, you should also look
at other finer aspects of your loan requirement and
preparedness. Based on your budget and financial plan,
identify when and how much loan you would need.
Accordingly, keep the documents to ensure smooth disbursal
of loan to you. Consult your financial planner or CA for expert
advice on your debt requirement and plans. Lastly, choose a
lender who offers you a competitive rate and is willing to offer
you tailor-made loan products in a seamless and convenient