Why My CIBIL Score is Not Improving?

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Image Source : https://cf.ltkcdn.net/business/images/orig/200908-2121x1414-Credit-score.jpg

If you haven’t borrowed funds earlier, you won’t have a credit history, and so, your CIBIL score will be low. People should put maximum effort in order to fetch a good score. As the person with the highest number will win the deal. The score creates a trust factor, and thereby it becomes easy to get loans. However, a low CIBIL score becomes a hindrance for those individuals who have an urgent need for money; this can affect their borrowing capacity adversely.

There are many ways to get loans, the criteria of which is totally grounded on the size of the loan, that is the amount required by the borrower. However, today all banks are compulsorily required to verify the CIBIL score of applicants of all financial products of credit, namely Personal Loans, Credit Cards etc. The score is a mandatory factor in every single transaction. Different forms of loans such as personal loans to other investments and even credit cards will require a check about the cibil score.

A credit score is actually a vital tool for assessing your creditworthiness while opting to apply for any kind of loan or any other form of credit. Sometimes, you must be confident that your payments were paid on time but still, you may be stuck with a low credit score. It is difficult to understand as there are a lot of factors that go into deciding your credit score.  

Let’s understand why your credit score might not be improving. To understand better how credit scores are calculated, it is essential to know the factors involved. 

Major factors that determine the CIBIL score are: 

  • Repayments on credit accounts 
  • Credit utilization ratio 
  • A mix of secured and unsecured borrowings 
  • Number of hard Enquiries done
  • Length of your credit history 

Having a cibil score is not constant. It can increase and decrease at its own pace. Even at times, when the cibil score is low, people can make a provision to bounce back and reach a higher degree of the score.

 How to improve CIBIL score quickly?

All is not lost, though. You can build up your credit score following some Do’s and don’ts. However, you need to practice these moves regularly and keep a track on your EMIs and Credit Card monthly payments.

Check Your CIBIL Report for Mistakes regularly

In certain cases, there may be mistakes when it comes to updating the records, make a note of incorrect information against your report. This impacts your score. So, ensure that you check your CIBIL report in detail from time to time. Get the errors corrected by submitting a CIBIL Dispute Resolution Form online. 

Avoid making many Credit Enquiries

More number of CIBIL enquiries can pull down the score faster. Three and more enquiries in a month can affect your score badly if faced rejections.

Don’t Apply for all Applications at once during a Short Period of Time

It’s a tendency to apply for too many credits in short intervals. But, this way not only the score falls but also the rejection affects the score. Ensure that you maintain a reasonably higher gap between the debts to make lenders believe you are not chasing credit.

Definition of Income Needs a Change 

The key to a healthy credit score lies in paying off a loan or card dues on time. But, it is indeed important to keep the spending under control, also. Ideally, the total expenses should not exceed 40%-50% of your income. 

Timely Payments

Most fall into the trap of frequent buying tendencies, particularly with credit card that offers you the convenience to shop anything from anywhere at anytime. If injudicious spends results in delay or default in the payment, better avoid that. It not only lowers your credit score but also adds late payment charges and taxes to the bill. 

Opt for a Longer Tenor when You Take a Loan

Try choosing a longer tenor for repayment, when borrowing a loan so that EMI is low, and so, you are able to make timely payments. When you don’t default, delay or skip paying EMIs, it’s good for the score.

Do not pile yourself with too much of debt

The number of loans you take in a fixed period of time should be less. Repay one loan then take another to save your credit score from dipping. If you take multiple loans at the same time, it will depict that you are in a cycle where you have insufficient funds. 

Don’t Exercise Debt Settlement

Looking at the debt, you may decide to reduce it by signing the debt settlement agreement. Though, it will cut down the size of the debt. But this will indicate your inability to repay the debt, thereby adversely affecting your score.

Avoid debt settlement at any cost and if you have already settled your debt, you are most likely to face rejection on fresh loan applications. 

As a result, we can infer that with regular practice, we can reach a level of a good score. Faster will be the recovery, faster will be the sanctioning of the loan. Keep an eye on the listed points to improve your credit score and build a good credit report.