CIBIL score, also known as credit score, is a 3-digit number which represents the debt repayment habit of an individual. It can range between 300 and 900. Generally, a score of 750 and above is considered to be good.
Importance of credit score
Financial institutions determine the risk factor involved in lending to a specific individual by checking numerous factors. CIBIL Score is one of them. It does not just influence the approval of advances like personal loans; it also contributes to deciding the rate of interest offered to the borrower.
Consequently, potential borrowers must take necessary measures that help improve their score before they apply for advances like a personal loan. The different ways that can help improve the credit score of an individual are discussed below.
Timely repayment of advances: Individuals must make the repayment in time to help improve their credit score. While having multiple loan accounts is not a problem, unpaid lines of credit can immensely lower the score.
Maintaining old credit cards: Credit cards used for years along with timely bill payment can effectively improve one’s CIBIL score. These cards should ideally be kept functional instead of opting for deactivation.
Maintaining credit limit: Sticking to the lower end of the credit limit helps in improving the CIBIL score of a borrower. It also helps in timely bill payment, ensuring that an individual pays it affordably and does not default.
Check credit reports: It is advisable to check the credit reports periodically. It ensures that in case there is any discrepancy or fraud, it is corrected in time.
Further, individuals should check their CIBIL score for personal loans well ahead so that they improve their chances of loan approval.