Taking a loan when you are faced with a financial crunch is the go-to option these days. But availing a loan is not as easy as it sounds. There is an entire process in place and you need to submit your documents for verification to the bank. One of the important things that the banks need is your credit score. If you do not have a good credit score, you will have a hard time during your personal loan application approval process.
- Credit Score:
The Credit Information Company (CIC) records of your Credit Information Bureau (India) Limited (CIBIL) score. The CIBIL score ranges from 300 to 900 and a credit score is considered as good if the score is above 750. There are a lot of things that affect your credit score. If you have any previous penalties or if you have not paid you dues on time then it will affect your credit score negatively. But if you have paid all your dues on time and have no penalties, your credit score will increase.
Here are ways in which you can improve your CIBIL score:
- Keep a Track of Your CIBIL Score:
Whenever you get your CIBIL score, don’t just check the score, read trough it properly to check if there are any mistakes or errors. Even the smallest mistakes in your CIBIL report can turn into something huge if not corrected on time.
If the error is big, you need to get it corrected as soon as possible as it will affect your credit score. You can get your credit report corrected within 30 days and if you fail to do so, these reports are considered as error free and will be used as final reports.
- Pay off All Your Credit Card Debt:
If you have a lot of credit card debt, it is better to take a loan and pay off this debt. If you have a lot of debt and do not have the money to pay the debt, not only will the debt pile on but it will also affect your credit score. By availing a personal loan, you will be able to pay off all the debt in one go. You will also have to pay a lesser rate of interest comparatively and it will help you to improve your CIBIL score.
- Don’t Close Your Older Accounts:
Closing your older accounts will result in a loss of your credit history that is linked to that account. The older your account, the better it is and the easier it will be for you to avail a loan. If you close an older account, you will lose credibility with the bank. Most experts advise to not close a bank account or a credit card 6 months prior to taking a loan.
- Pay Your Debt on Time:
It is necessary to pay off all your debt on time. If you miss even one debt payment, it will affect your credit score badly. You can keep a tracker that will help you remember to pay off all the debt on time. if you default even once, you will have to pay some penalty and it will be added to your record permanently.
- You Can Ask for Forgiveness:
Even a single default can create havoc and it will affect your credit score. But if you missed put on your debt repayment because of some genuine reason, you can talk to your lender or the bank and explain them the situation. But if you have too many black spots on your score even your banks or lenders will not be able to help you.
If is necessary that you maintain a high credit score in order to get maximum benefits from your bank.