Credit or CIBIL score, a 3 digit number which represents the credit repayment habits of an individual, ranges between 300 and 900. Financial institutions offer different lines of credit to customers, based on their evaluation of risk involved in offering the credit to that individual. CIBIL score is one of the prime determinants of not just approval but also that of the rate of interest applicable. Higher risks involved for the financer increase the interest rates on credit cards.
Be it a credit card or any loan, CIBIL score is one of the essential criteria for approval of both. Conversely, how an individual repays such advances also impacts the score. Any potential applicant should know the ways to improve it with well-planned usage of such credit-based tools. The guidelines mentioned below can help to improve the CIBIL score easily.
Six smart ways to improve credit or CIBIL score
- Timely bill payment
Timely bill payment is imperative to improving the CIBIL score. In case an individual misses out on his or her credit repayments, it is recorded as a negative financial behavior. The credit score automatically decreases. Additionally, not paying credit card bills within the due date attracts substantial interest rates plus other applicable charges as per the terms of the card issuer.
- Put a cap on credit limit
Credit cards are offered to users with a pre-set credit limit. In case an individual spends more than that credit limit, they have to pay an extra charge to the financial institution. In case an individual finds that their regular spending habit is making them spend more than this limit, they should opt to put a cap on the limit. Regular overspending can also impact the CIBIL score adversely.
- Avoid unnecessary loans
Availing loans or using credit cards for trivial reasons must be avoided as repayment is a liability. In case an individual defaults on repaying the dues, the CIBIL score goes down drastically. Therefore, it is also advisable to plan for repayments beforehand and not borrow more than what is absolutely necessary.
- Clear previous debts
Clearing previous debts essentially increase an individual’s borrowing capability. Subsequently, the repayment capability also improves, and so does the CIBIL score. A higher score ensures your creditworthiness to avail of a new loan. Thus, borrowers should consider reducing their existing financial debts before applying for a new one.
- Clear dues in advance
Clearing all dues prior to the last date on a regular basis will improve the CIBIL score of the borrower. In case you face difficulties in clearing the entire debts at one go, opt for the balance transfer facility available with both loans and credit cards.
- Avail a credit card
There are many ways how borrowers can use a credit card to improve their credit score. Essentially, maintaining a credit card and not exceeding the credit limit is an effective way to develop the score.
Usually, applying for these credit cards is also easy thanks to top card issuers offering application processes online. You can easily apply for a feature-rich card such as the Bajaj Finserv RBL Bank SuperCard online or via the mobile app.
Financial institutions like Bajaj Finserv also brings you pre-approved offers that make availing credit cards quick and easy. Pre-approved offers are available on numerous financial products like credit cards, home loans, personal loans, business loans, etc. You can check your pre-approved offer by providing your name and phone number.
Numerous credit options are available for borrowers these days. While loans serve as high-value finances, credit cards cater to minor expenses. It is important that borrowers also learn how to use their credit cards wisely in order to not just better the score, but also lower their expenses.