Your CIBIL credit score is a clear indication of your overall creditworthiness. By simply attributing your credit behaviour to a number, an instant assessment of your credit profile can be made.
While CIBIL (now TransUnion CIBIL) used to be the only credit bureau in India, today it is one of four such agencies that include CRIF High Mark, Equifax, and Experian as well. Irrespective of the credit rating agency in question, the basic premise does not change, which is that you do need to maintain a healthy credit score.
Accordingly, taking the term ‘CIBIL Credit Score‘ to be universally representative of your overall credit score in India, let us look at possible reasons for which your score on this front may still be languishing.
Past Transgressions Not Yet Accounted For
Unless you pay up past dues because of which your credit score deteriorated, your CIBIL credit score will not improve.
So if you are yet to pay an EMI that you missed on your car, or perhaps a mobile bill that remained outstanding (and still does!), it is time to make amends.
Reporting to Credit Agencies
Simply paying up past dues is not enough for improving your CIBIL credit score. Once you have paid up, it is important that confirmation of payment is made to credit rating agencies like the ones mentioned in the introduction.
Yes, updates do get sent out automatically but it is important to follow up with your creditor. So, for instance, if you failed to pay a loan installment which affected your credit score, once you have made the payment, follow up with the lender to ensure that your payment has been updated with requisite credit rating bureaus.
Making Way Too Many Credit Inquiries
If you continue to make incessant credit inquiries for loans, credit cards, etc. while being fully aware of your adverse credit score, doing so will only go against you.
Remember that all such inquiries get reported to credit rating agencies. When you repeatedly indulge in such behaviour, it is a clear sign of desperation that does not go well with credit bureaus – ultimately further hampering your credit score.
Therefore, take it easy and diligently work towards making credit payments before making any additional credit inquiries.
Your CIBIL Credit Score is Not Foolproof
Remember that your CIBIL credit score is not foolproof; it is prone to errors due to mistakes made by other parties.
For example, you might have missed an EMI payment which you eventually did pay. This might still go reported to credit bureaus as unpaid, thus negatively impacting your CIBIL credit score.
Therefore, get your credit score assessed periodically. Remember that today, there are provisions to avail such credit reports completely free of cost, at least once a year. You can opt for credit reports more often than that; once you have these reports with you, examine carefully for payments which you may have made – and yet not accounted for, adversely impacting your credit score.
Poor Credit Utilisation Ratio
Sure, you barely have any outstanding loans and are also making timely payments on all your dues. But are you using excessive credit for that? If you have a poor track record and then go ahead and utilize your available credit excessively, this will surely not help your cause as far as improving your CIBIL credit score is concerned.
Ideally, you should not use more than 30% of your available credit. So if you have a credit card with Rs. 2 Lakhs of credit limit available on it, you should aim to keep your utilisation under Rs. 60,000/- at any given moment.
Not Increasing Your Credit Limit
In case your bank agrees to increase your credit limit, while you still maintain a healthy credit utilisation ratio as outlined above, it will certainly help you improve your CIBIL credit score.
Often, folks fail to cash in on such a provision, ultimately languishing with a poor credit score.
Not Availing a Secured Credit Card
A secured credit card is one that is backed by a deposit with the issuing bank or lending agency. Be it ICICI, HDFC, or SBI Bank among others, most leading banks in India do offer secured credit cards.
You can avail of a secured credit card even if you have a reasonably poor credit score; after all, your credit card is backed by the security which you have placed upfront with the bank.
Now, when you avail such a card and use it diligently, unflinchingly making your payments on time – and ideally in full, such actions on your part will certainly help improve your CIBIL credit score.
As you can see, it is really not that tough to improve your CIBIL credit score. Hopefully, this article serves its purpose of spreading awareness around why your credit score remains poor and the steps you can take to improve it.