Tips To Improve Poor Credit Score

Lenders look at many factors when processing your loan application. One of the most important among them is your credit score.

A credit score is a numerical evaluation of your creditworthiness, which mirrors your capacity to repay debts. TransUnion CIBIL Limited (Formerly known as: Credit Information Bureau (India) Limited CIBIL), provides this score. It is one of the four credit information companies licensed by the Reserve Bank of India.

Your credit score is based on your credit history and credit report. The credit score ranges from 300 - 900 and the minimum CIBIL score for a loan depends upon the kind of loan you wish to avail.

Having a poor credit score can reduce the chances of your loan application approval. Therefore, improve your credit score before you apply for a loan.
Here’s how you can improve your poor credit score.

Check Your Credit Report

Information in your credit report forms an important part of your credit score. Therefore, you should always keep a close check on your credit report so that you know about delayed payments and defaults and can take steps to rectify them. Moreover, there could be errors in your credit report that can lower your credit score. Resolve it as soon as possible to make a positive impact on your credit score. 

Pay Your Bills on Time

Your credit history and loan payments determine your credit score. Therefore, a delay in bill payments can adversely affect it. Keep your credit card clear of all debts and make payments 5 days before the due date. Cheque payments must be made 10 days prior to the due date to ensure payment on time. 

Some banks offer payment reminders through online banking portals. You can also start automatic payments towards your bills from your bank account.

Spend within The Credit Utilisation Ratio

Avoid using your credit card for all purchases. Ideally, you should maintain a credit card utilisation ratio of 30% of your credit card limit. Lenders tend to consider you credit hungry if there is an excess usage over this limit.
Using your card within the limit could enhance your creditworthiness and help you improve your score. Once you have obtained the minimum CIBIL score required for personal loan, you can apply for it and get it approved without any hassle.

Avoid Applying for Multiple Loans In a Short Span of Time

When you apply for a loan, the lender enquires about your credit score and credit report. So if you make multiple applications, the credit bureaus would receive many inquiries for your credit history. It shows that you are credit hungry and therefore can be a risky borrower for the lenders.
Avoid applying for multiple loans or making several credit card applications in a short span of time.

Get a Secured Credit Card

One effective way of improving your credit score is to take a secured credit card. Leading banks offer secured credit card against a deposit. This deposit sets off any default in bill payments. When you repay your debts and balances on time, your credit score improves, helping you obtain the minimum cibil score required for home loan faster.
Once you have the minimum credit score for loan approval, you can easily avail a loan to fulfil your financial goals with lenders like Bajaj Finserv.

Additional Read: how to improve CIBIL score
 

Summary


Credit score is a vital determinant in your loan application. Keep a check on your credit report if you have a low credit score. You could detect a fraud or suspicious activity in your credit report, and take measures to correct it. Moreover, you can also know if there is any error or mistake in your credit report that can adversely affect your credit score. Rectifying this mistake can automatically improve your credit score. Always use your credit card frugally and clear off all debts on time. Not spending beyond the credit utilisation limit of 30% from your overall limit can help improve your credit score. You can request your bank for a payment reminder so that you do not miss out any payments.

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