There are many credit bureaus in India like Transunion CIBIL, Equifax, Experian, CRIF High Mark. Working in the field of credit score since 2000, TransUnion CIBIL is considered as one of the most important and trusted credit bureaus in India.
It is also worth noting here that in 2002 TransUnion Cbil took over the responsibility of collecting borrowers’ details from RBI. Many leading banks like SBI, Union Bank, Indian Overseas Bank including many government banks and private banks like ICICI, HSBC use the credit score of TransUnion Cbil.
How to Improve Credit Score?
Credit score is a view
* Poor CIBIL score of 300 to 550 – Hard to get a foothold in traditional and legacy banks.
* Moderate CIBIL score of 550 to 650 – Loan can be availed if bank officials help or sign strong party guaranty or pledge tens of assets.
* 650 to 750 good CIBIL score – easy loan.
* Over 750 – Banks, Financial Institutions, FinTech Companies will pick them up. It is not surprising if they get a loan at a slightly lower interest rate from traditional banks. If only they can use fintech apps like Gret, then watch out.
So maintaining a credit score of at least 650 is essential. Let’s see how to improve credit score with 650 for sure and 750 as aspirational.
Pay loan on time:
35 percent weightage is given in the credit score for taking out a loan and repaying it properly. So if you take a loan, whatever it is, pay it off regularly. This includes credit card loans. Make sure the credit card is paid before the due date. Your credit score will directly suffer beyond the penalty charge you pay separately for late EMIs.
How much do you borrow?:
If you have taken a loan of just 10,000 rupees, 15,000 rupees and suddenly ask for a loan of 1,00,000 rupees, the banks will hesitate to give the loan. Using a credit card with a credit limit of at least Rs 1,00,000 can help you get a loan of a few lakhs. The Cover Fox site states that loan amount is given a 30 percent weightage in the credit score. So if you take a loan, buy it in a relatively large amount. Don’t take unnecessary loans for that.
Credit history
15% weightage is given in the credit score for taking one loan and repaying it properly and then taking out another loan, long repayment period. This is called credit history. For that, don’t drag the loan to be settled in one year for 3 years. Choose the loan term according to your repayment capacity.
Loan Amount Vs Usage:
Using only 40-50 percent of the credit limit on credit cards and current account overdraft accounts can help improve your credit score. Either using the full amount you’ve been offered or using more than the loan amount means that you don’t have the money, so financial institutions will assume that you’re taking out a sudden extra loan. Credit score will also suffer. Some credit bureaus even reportedly give a 10% weightage to credit utilization while calculating an individual’s credit score.
If the bank asks you to increase your credit card balance, don’t deny it and say yes. But keep your spending in check. This will lower your loan-to-value ratio and have a positive impact on your credit score.
New loan + multiple types of loan
A person who regularly borrows and repays loans can improve his credit score every time he takes out a new loan. New loans are given 10% weightage in credit score.
Similarly, 10% weightage is given in the credit score for different types of loans to encourage multiple types of loans. It is better to take loans one time gold loan, next time credit card loan, next time home loan and then business current account overdraft loan. Stick to at least once an asset secured loan and again an unsecured loan. It helps to improve and strengthen credit mix and credit history.
Multiple loans
Don’t buy credit card loan, gold loan, home loan all in one month. This will raise the fear among financial institutions that you don’t have cash flow and people are living on credit. If you need more money, take the entire amount in one loan. That is also your interest rate if it is a loan against assets like gold loan, landed property etc. Multiple loans at once can damage your credit score.
Loan Denial
They refuse to give you a loan for some reason. The same story continues in another financial institution. If it is the same story with the next bank, don’t apply for a loan for at least a few months. If you are exposed to frequent loan denials, it will also severely affect your credit score. This also applies to credit card applications.
Joint Account:
If you are using a bank or financial institution account jointly, keep all the accounts in order. Anyone defaulting on joint cards and accounts will affect the other’s credit score. So also pay attention to joint accounts used by husband and wife.
Paying full duty
In case of credit card, one only needs to pay the minimum due amount. Even a few months in a row can hurt your credit score. Always pay your credit card due in full.
-gowtham