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Tips to Improve CIBIL Score

A low CIBIL score can be a large hindrance while applying for a loan or a credit card. Today, CIBIL credit scores are one of the first things that lenders look into before granting loans to applicants. A good CIBIL credit score is the indication of a financially stable individual. A good CIBIL score is not the result of zero credit activity. In fact, low credit activity also results in a low CIBIL credit score.

In times of great need for credit like when you need a home loan to buy your dream home or a car loan to buy your first car, a low credit score can result in the rejection of your loan application. Maintaining a healthy score is a just a matter of due diligence and systematic discipline.

For those who are fretting about a low credit score, here are some steps to ease the burden of a low CIBIL score.

Find out your current CIBIL score

Find out your current CIBIL score in order to set off on the path of rectifying it. An individual has the right to view his/her CIBIL credit score at least once a year in order to confirm his/her financial health. A Credit Information can be requested for on the CIBIL website. You will be required to submit your KYC (Know Your Customer) documents and Rs.470 on the website. Your application will go through an online authentication process, post which your CIBIL score will emailed to your registered email ID. You can then download the scores instantly.

Be open to changing your credit behaviour

Once you know that your CIBIL credit score is low, you have to be open to changing your credit behaviour. This can be done by being proactive in rectifying your score if it is below 750. In order to begin rectifying your credit behaviour by accepting that some of the things you have been doing are wrong and have contributed to your low credit score.

Check if the account information pertains to you

Check if the following account information provided in the Credit Information Report are accurate-

  • Bank account details
  • Loan details
  • Credit Card details
  • Your identity
  • Status of accounts
  • DPD or days past due in each credit card and loan you have availed
  • Written off flags
  • Settled flags

Days past due is the number of days a payment is due on an account in the respective month. DPD above ‘000’ has a negative impact on your CIBIL credit score.

Flags are an indication of your past defaults and could result in a low credit score.

Identify where you went wrong

A CIBIL credit score is very handy as it categorically lists out all your mistakes. It is, therefore, imperative that you learn how to read a Credit Information Report. Once you learn to read your Credit Information Report, you will be able to find out where and why your score is low. You must remember to check all the account information pertains to you before finding out where the fault lies.

Errors in a report

There could be discrepancies in the reporting process when your bank gives information to CIBIL. Such errors, could in effect, lower your score. In order to rectify these kinds of errors you will have to raise dispute using CIBIL’s dispute request form on the CIBIL website. Once you raise the request, the dispute resolution cell of CIBIL will contact the credit institution pertaining to your loan. 30 days is the stipulated turnaround time for disputes to get resolved.

Errors in the report could include any of the following-

  • Account balances
  • Overdue amount after repayment of loan
  • Closed loan account continues to appear in your Credit Information Report
  • Identity theft
  • Details of a loan that you have not availed at all

Improving your score

Once you have identified your mistake, build a strategy to amend your score. Find ways to pay your unpaid debts, outstanding amounts or even settled amounts. In case these amounts are not paid off, good credit behaviour on new accounts will not increase your score.

In some cases, scores improve even with the existence of unpaid debt. In this situation, lenders will take into consideration all the negative flags against the unpaid credits while appraising your loan application.

Speak to your creditors

A good strategy to elevate your credit score is to speak to your creditors and come to an understanding as to how you will clear your debt. Discipline, diligence and cutting corners will enable you to pay off all your debts.

Post reflection

Here is a checklist of things you must ponder over once you have elevated your credit score to 750 or more-

  • Keep balances low on your credit cards
  • Make timely repayments towards your credit cards and loans
  • Maintain a healthy mix of secured as well as unsecured credits
  • Make wise choices in future loan applications

Corrective measures can improve your credit score as it is not set in stone. Always maintain a good CIBIL score as it proves you are creditworthy. Not just banks and financial institutions but employers also check credit scores of their future employees. Hence, it would hold you in good stead to keep a constant tab on your credit scores and make sure your financial behaviour always results in the maintenance of high scores on your Credit Information Report.

FAQs Regarding improvement in CIBIL/Credit Score

Q. Does a good CIBIL score mean a better rate of interest on a future loan?

CIBIL scores are only one of many factors looked into by lenders. Your CIBIL score is an indicator of your credit-worthiness, but lenders also like to look at factors that determine your stability. Your work experience, number of years with your current employer, who your current employer is, assets in hand, savings, etc. are all factors that affect your eligibility and eventually the interest rate on your loan. You can talk your bank into giving you a better rate of interest if you have good negotiating skills and can convince them that you are the ideal loan applicant and that they will have no problem recovering the loan amount from you. A good CIBIL score is merely a bargaining chip in the negotiation process, as there are other important factors as well.

News about CIBIL Score

  • Mobile-app lender Branch International to start operations in India

    Branch International, a digital lending platform is all set to start its operations in India. The US-based fintech startup already has operations in Africa and Latin America. The mobile app-based lender has already received the Non-Banking Financial Company (NBFC) license from the Reserve Bank of India (RBI). The app-based lender is targeting first-time borrowers in the country who are not able to get access to credit due to lack of the required documents. 

    It is looking forwards to offer customers in India personal loans from Rs.500 to Rs.50,000. The loan disbursal takes place via the company’s Android app that can be downloaded from the Google Play Store. Branch International offers loan to consumers in a non-traditional way. Borrowers don’t need to submit the usual documents such has CIBIL score, salary slip and bank account statements while offering the loan. The startup focuses more on offering a direct and seamless access to finance. The app-based lending platform uses data from a user’s mobile device.  

    Founded in 2015, the platform mainly targets people who are self-employed and come from an informal sector. Branch International uses machine learning algorithms to analyse thousands of data points to determine the creditworthiness of a user and offer a loan in minutes.  According to Charishma Chotalia, General Manager of Branch India shares, the demand for loan from the Indian consumers has already crossed the company expectations. You can sign-up on the app and create profiles directly in the app by filling out a form with all the necessary details. After the submission of details, your profile will be verified. Post this, you can start applying for loans and thereby receive money in your bank accounts within minutes.  

    You can repayment the loan via the app by using UPI, debit cards, as well as net banking. You should make it a point to repay the loans on time to improve your credit score in order to get better deals on loans.  

    19 March 2019

  • Insurance Products to be improved by Data Analytics

    The chairman of the IRDAI (Insurance Regulatory and Development Authority of India), T.S Vijayan recently revealed that unless regulatory agencies and companies contributed to the efforts on enhancing the reach of insurance through the use of data analytics, it won’t take off from the present level of 20% - 22% of the population.

    Data analytics has been identified as the main instrument to enhance the distribution as well as design of insurance products. The main reason as to why the IRDAI wishes to implement action is because, as stated by Mr Vijayan, the authority believes that it can reach 100% of the population in coverage.

    15 June 2016

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