The credit score is an important factor which has a significant effect on an individual’s financial life. It can help you get approvals for loans easily and also avail for credit cards from reputed financial institutions.
The credit score ranges from 300 to 900. A score around or above 750 is considered excellent, and a borrower is entitled to the best terms available in the market regarding loans and credit cards. A score between 600 and 750 is considered average, however, with such a score a borrower can still avail good deals.
Given its weight, it is imperative to know how to improve credit score to avail better loan and credit card options.
How to improve the CIBIL score?
There are a few avenues which you can take to develop an excellent credit score –
- Timely repayments: The first thing a lender looks for in your credit score is how responsible you are with due payments. This factor is considered duly, which decides your creditworthiness. Financial institutions have online payment facility for credit card bills, such as the Bajaj Finserv credit card online payment facility which make payments hassle-free. There are other ways as well as how you can repay your credit card debts.
- Proper credit utilisation: How you use your credit limit also has a considerable impact over your CIBIL score. It is not ideal for your credit score if you tend to exhaust your credit limits. You should only use a certain percentage of your limit to improve the score. You can avail multiple credit cards so as not to limit your spending while worrying about your credit limit. That way, you can use your credit card to improve your credit score.
- Old credit cards: If you have old credit cards, make sure to use those properly instead of going for newer credit cards. When you use an old credit card while making proper payments, it can develop a fertile credit history. It is a deciding factor on how to improve credit score. Even if you don’t use your old card, you should not close it, as that will result in a higher credit utilisation ratio which has a negative impact on your score.
- Repayment tenor: When initially taking advances, ensure you opt for the option where repayment is easy and cost-friendly. As a first time borrower, you might be charged a higher rate of interests and given lesser credit options because of no significant credit history. The only way out is availing a repayment tenor which suits your affordability. Thereby, you can comfortably repay leading to a good score.
- Avail loans against unutilised credit card amount: In NBFCs like Bajaj Finserv, there is an option where you can use your unutilised credit card amount and convert it into a loan. It is a better option than traditional loans as there is no interest charged on such loan and only a flat 2.5% processing charge. It shows you can use a credit card wisely, and it reflects well on your credit score. This loan can be paid in 3 easy EMIs, which also improves your credit score.
- Credit mix: Another effective tip on how to improve your credit score is by mixing your credit. Ensure to avail a mix of secured and unsecured loans with long and short term tenors throughout your credit taking stint. It benefits the CIBIL score.
- Debt consolidation: In case, you have debts from various institutions, it becomes problematic to keep track and also becomes expensive because of the different interest charges. You can avail a single loan to repay all the existing debts, and pay EMIs for only one loan. It can help you improve your credit score.
- Limit multiple loaning in one time: Do not avail too many loans at one time. It deprives your value as a borrower and erodes your credit score. Instead of multiple loans you can avail a Bajaj Finserv RBL Bank SuperCard and use your unutilised amount as a loan.
- Too many loans: You should not apply for too many loans as well, because every time you apply, the lender enquires about your credit history, which has a negative impact on your credit score.
- Regularly check your credit score: Ensure to regularly check your credit score. Not only will it tell you of your performance as a borrower, but also help rectify any discrepancy in your score.
You can enjoy many benefits if you are aware of how to improve credit score and how to use a credit card to do so. Maintain a high score to enjoy the best offers and features from financial institutions.
