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Build Your Borrowing Profile Strong through CIBIL Score

CIBIL score or credit score is the indicator of your capability to repay a loan. It is a score based on how you have managed your debts till now. Awareness about the credit score is still one of the issues in Indian lending market. Even today there are many people who are either unaware of how crucial CIBIL score is or they ignore it despite knowing its importance, thinking that its not important now because they don’t need a loan.

Those people who need a loan now but have a low credit score are stuck in an unfortunate situation because of their own ignorance in the past. At this situation they have only two options to choose from; either they can opt whatever the deals they are getting which obviously would be having a higher rate of interest or if it is possible then postpone the loan and build your credit score over the next 9-12 months.

 To improve your credit score follow these tips:

1. Avoid multiple applications of loan and credit card:

You need to study products of various banks and NBFCs and ascertain which loan or credit card suits your requirement. Applying for loan or credit card in various banks or in short span of time have a huge negative bearing on your credit score.

2. Settle dues of a Loan or credit card:

Settling a loan or credit card due for an amount that is less than the actual principal amount due for repayment impacts credit score adversely. Though from the outset it might look a good situation to you where you have to pay less, lending institutions mark this as a loss. It suggests that bank had no other option but to lower the amount or you would have defaulted on the loan. It appears on your credit score as a big negative aspect and is reflected for around 5-7 years.

3. Avoid delay or missing any payment:

Every debt has periodical due dates within which the required payment needs to be made. Delaying in payment invites for late fees. But these late payments or skipping the payment is another important factor which impacts your credit score greatly. It is best to pay your EMIs on time to positively build your credit score over time.

4. Avoid large debt or large amounts of debt:

Having multiple loans at the same time or constantly utilizing your credit card limit for over 50% is also a debt unfriendly situation. In such a case if you are going to apply for credit then your credit score will have high debt to credit ratio thus negatively impacting your score.

5. Regularly check your credit report:

There can be cases where your credit score is getting pulled down due to some errors like your loan account still been shown even though you have repaid the loan and closed the account. Secondly, it also gives a fair idea of what is included in the credit report, you can use this information to manage your debt in order to improve your credit score.

Though this list is not all-inclusive, though if you follow the above-stated tips then there are high chances of your credit score improving and staying on a higher side.