Improving your CIBIL score

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In our last blog we educated Raj about CIBIL score. Now, Raj knows that there are four Credit information Companies namely CIBIL, Experian, Equifax and Highmark. Out of these four, CIBIL is vividly used by Banks, NBFCs and customers. Raj also knows that his low credit score was the reason his loan application was rejected. We will now talk about ways Raj can improve his CIBIL score. We will also talk of ways you can secure loan with a bad CIBIL score.    

Knowing your CIBIL score is the first step in the right direction towards securing a personal loan. More often than not, we end up applying at various banks, without checking out our CIBIL score. This works out fine if your credit score falls in the healthy range of 750 – 900. But if your Credit score is bad (300 – 700) then generally you don’t lend up a personal loan and also your credit score takes a hit every time a bank enquires about your credit history with CIBIL. You can follow these simple steps to get your CIBIL score

1) Go the website of cibil and click on Buy Your Credit Score.

2) Fill in your details and make payment. Depending on your input if the authentication is successful your CIBIL score and Credit Information Report will be available instantly. It will also be sent separately to your email ID.

Congratulations to you if your CIBIL score is in the range 750 – 900. And don’t lose hope if it isn’t.

There are always ways to improve your CIBIL score.

1)  No New Loan: If your credit score is really low (300-600) then applying for a new loan would not be a wise thing to do. Most likely, your loan application will be rejected. Also, every time a bank enquires with CIBIL about your credit score, your score goes down. Ideally, one should clear his standing loans before applying for a new one. Even with a good credit score, it is always advisable to not take too many loans.

You can also consolidate your multiple loans by refinancing it with just one loan. It will help you keep a track of your EMIs and will eventually help you in strengthening your CIBIL score.

2)  Be On Time, Everytime : That’s the key to success and good CIBIL score. If your CIBIL score is marginally below the healthy credit score range of 750 – 900, you can start paying your existing EMIs on time to improve your CIBIL score.

3)  Improve Credit Utilization: Credit Utilization Ratio is the proportion of total credit used to total credit available to you. For example, if you have a credit card with a limit of 80,000 INR and you have already used 30,000 INR for purchase, then your credit utilization ratio is 30,000/80,000 or 37.5%. A high credit utilization ratio can lower your credit score and a low ratio can improve your credit score. Ideally, a credit utilization ratio of 35% or less is desired by lending banks and NBFCs.

Not using your credit card at all can adversely affect your credit score and so can doing away with your existing credit cards. Say, you have 5 credit cards with limit of 1 lacs INR each and your total credit usage is 80,000 INR. Here, your credit utilization ratio is 80000/ 500000 or 16%. Now if you decide to retain just your two frequently used cards and close the other 3 then your credit utilization ratio spikes to 80000/200000 or 40%. Ideal behavior would be to maintain a credit utilization ratio of 35% and below and not over use your credit.

4)  Apply wisely:  Applying in multiple banks for a personal loan can adversely affect your credit score. You may think of it as a smart move to apply at various banks for a personal loan and chose the best one. Every time you apply for a loan with a bank, the bank checks your credit score with CIBIL. And every time the bank enquires about your credit score with the bank, your credit score takes a dip. It’s wiser to apply for personal loan at the bank where you have the high chance of conversion or you can apply with KountMoney. Once you apply with KountMoney, we look for the bank or NBFC that suits your need and send you quote accordingly. It saves you time, hardship and keeps your CIBIL score healthy.

5)  Go For Secured Loan:  Personal loan is unsecured in nature and hence your CIBIL score is the most important parameter to judge your credit worthiness. If you have a bad CIBIL score then secured loans is a way out. Secured loans have collateral attached with them and hence CIBIL score is not the deciding factor. You can take a secured car or home loan, pay up the EMIs regularly and improve your CIBIL score considerably.

6)  Personal Loan With Bad CIBIL score: So your CIBIL score is in the not-so-safe range of 300-700 and you still want a personal loan real bad then NBFCs (Non Banking Financial Companies) are there for you. Generally NBFCs cater to borrowers with CIBIL score of around 600. Yes, the interest rate is on the higher side (>15%) but at least you will get a loan. Pay up your EMIs on time, improve your CIBIL and apply at banks next time.

Improving your CIBIL score is a tough business and takes time. Ideally it takes 12 – 18 months before your CIBIL score improves. So have patience, pay your EMIs on time and see your CIBIL surge up. For personal loans with bad CIBIL score, you can always connect with NBFCs.

If you still have queries or want to know which NBFC Raj applied to, to finance his Euro trip, kindly write to us @ talk2us@kountmoney.com.

HAPPY LOAN TO YOU!

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