We have discussed different reasons for lower scores and ways using which you can improve your CIBIL score. The significance of a good CIBIL score should never be underestimated.
CIBIL score plays a crucial role in furnishing your creditworthiness. Financial institutions use this score using your credit histories such as payment patterns and historical credits. You will be branded as a risky borrower if you own a lower credit score.
Reasons for Reduced CIBIL score
- The high number of credit cards/loans
- Delayed payments
- The outstanding balance of credit card
- Increased utilization of credit
How to Improve the CIBIL Score?
In case you hold a lower CIBIL score, do not panic, and just follow simple steps as given below. These steps will aid you in attaining a good score in the future.
- Make timely payments of your loans as well as credit cards. Make sure you do not cross or even come close to the credit card limit.
- Checking credit reports should be a good financial habit. You should regularly examine and check your credit reports. It will help in identifying your delayed payments that reduce your score along with the information of the credit report.
- Avoid applying for “too many” borrowings or loans. It clearly indicates a credit hungry behavior that lowers your credit score. Borrow only when you repay it. It means that you should go for borrowings only in case of necessity.
- A credit card should be used as a utility product rather than a luxury one. Make sure you utilize credit cards wisely and ignore unnecessary usage.
- A lower score may not necessarily be caused due to your financial behavior. Regular monitoring of credit history will help in revealing inaccuracies, if any, from the bank’s end.
- Other methods are never applied for credits after rejections, opt for secured loans, avoid joint application for loan/credit card, and never write-off or settle your loans.
Credits/loans can be a useful way of fulfilling business or personal financial needs. It requires your common sense to manage your financial life along with getting awareness of good financial habits.