You are not alone if you are new to credit and wondering how to improve your CIBIL score. Building a strong credit score from scratch can seem challenging, but it is entirely possible with the right steps and strategies. The CIBIL score plays a paramount role in deciding your eligibility for Loans and Credit Cards, so working on improving it early helps secured better financial prospects in the future.
Step 1: Understand the importance of your CIBIL score
Before learning how to improve your CIBIL score, understand what it is and how it impacts your financial life. The CIBIL score is a three-digit number that is between 300 to 900, with a higher score indicating better creditworthiness. A score of 750 or above is usually considered good and improves your chances of securing Loans or Credit Cards at favourable terms.
Step 2: Apply for a Credit Card or Loan
The most common way to build credit and eventually learn how to increase your CIBIL score is by applying for a Credit Card or small Loan. If you are new to credit, you might want to commence with a secured Credit Card, where you deposit a sum as collateral. Secured cards are easier to obtain for those with no credit history and can assist you build credit over time.
Step 3: Make timely payments
A major factor that affects your CIBIL score is your payment history. The best way on how to increase your CIBIL score is by making all your payments on time. This includes Credit Card bills, utility payments, Loan EMIs, and rent. Even a single missed payment can impact your score, especially if it goes unnoticed for an extended period.
Step 4: Keep your credit utilisation low
When you start using credit, keeping your credit utilisation ratio low is important. This means that even if you have a high credit limit, avoid using too much of it at once. High credit utilisation means that you are financially strained, negatively impacting your CIBIL score.
Step 5: Avoid multiple credit applications
If you are new to credit and actively trying to build your score, applying for several Credit Cards or Loans is tempting to see what you qualify for. However, this can hurt your CIBIL score.
Step 6: Monitor your credit report
Regularly monitoring your credit report is another effective way to ensure your CIBIL score is on the right track. You can request a free credit report once a year from CIBIL. Look for any errors or discrepancies, such as late payments that were made on time.
Conclusion
Improving your CIBIL score as a newcomer to credit requires patience and consistency. While it takes time, the efforts you put into building and maintaining a strong credit score will pay off as better Loan approvals and favourable interest rates in the future.