Your CIBIL score, or credit score, plays a crucial role in the approval of any loan. It is one of the most important factors in determining the terms of your loan agreement. Your credit score becomes a valuable financial asset. If you want to take a loan for a bike or scooter but have a weak CIBIL score, you may face difficulties in getting approved. To buy a two-wheeler in India, you should maintain a credit score of 750 or more. In such cases, it is important to focus on improving your CIBIL score. Let’s discuss how to do this.
Check Your Credit Report and Fix Errors
The first step to improving your credit score is to get your credit report from trusted sources like TransUnion CIBIL, Experian, or Equifax. Check it carefully for mistakes in your personal details, account information, payment history, or loan records. If you find any errors, report them to CIBIL to get them corrected.
Pay Your Bills on Time
One simple way to improve your credit score is to pay all your bills on time. Late or missed payments of electricity bills, credit cards, or loans can lower your score. To avoid this, set reminders or use auto-payment options.
Clear Any Pending Loans or Dues
If you have any unpaid loans or credit card bills, try to clear them as soon as possible. Banks check your past repayment record before giving you a loan, so always try to keep a good payment history.
Use Less of Your Credit Limit
The credit utilisation ratio (CUR) is how much credit you use from your total credit limit. If you use too much credit, banks may think you are financially weak. Try to keep your CUR below 30%. If your credit limit is low, you can request your bank to increase it.
Keep a Mix of Different Loans
Having a mix of secured and unsecured loans helps improve your credit score. Secured loans (like home or vehicle loans) require a security deposit, while unsecured loans (like personal loans or credit cards) do not. A good mix of loans shows that you can handle credit responsibly.
Avoid Too Many Loan Applications
Every time you apply for a new loan or credit card, the bank checks your credit score. This is called a hard inquiry. Too many hard inquiries in a short time can lower your score because it shows you are in urgent need of money. Apply for new loans only when necessary.
