Improve CIBIL score from 550 to 750 and become eligible for a new credit card
Different lenders have a different CIBIL score cut-off for approving the credit card application. That said, most unhesitatingly offer a card to applicants with a score of 750 or above. If your score is below the desired mark, make efforts and bring the score up before applying for a new card.
Shared ahead are some practical tips that efficiently improve your CIBIL score. None of these solutions, with the exception of only the first one, and that too when it alone is the cause of your poor CIBIL score, can effect improvement quickly.
In fact CIBIL score CANNOT be improved in an instant—it takes time, in proportion to the difference between your present score and the cut-off mark and sincerity of your efforts.
5 Tips to improve CIBIL score
- Remove inaccuracies, if present
A system error in your CIBIL report can cause you dearly. For example, your score may continue to take a hit if it is still showing a loan that has been paid as outstanding. Order your copy of CIBIL report from the official website of CIBIL and carefully study it to ensure everything is listed accurately.
- Pay off any outstanding amount
Not paying each month’s balance in full is a big mistake, but paying just the minimum amount is even worse. Always do your best to clear the balance in the same billing cycle. If you just can’t pay off the balance in a particular month, at least pay more than the minimum amount. This will ensure that the extra amount that you will have to pay (that is the amount gathered due to accruing of the interest) is less.
Keeping an outstanding balance on the card is one of the biggest factors for poor credit score. Pay off any current outstanding balance as soon as possible and in future avoid overspending.
- Maintain a healthy mix of secured and unsecured loans
Secured loans such as the home loan improve CIBIL score; on the other hand, unsecured loans such as credit card debt and personal loan negatively impact your credit score. Your loan portfolio should not contain a high proportion of unsecured loans. An ideal portfolio is one in which secured loans account for 80% and unsecured for 20%.
- Reduce the number of cards
A wallet full of credit cards may look impressive to some, but carrying too many credit cards reports unfavorably on your CIBIL sheet. Anything above 3 credits can be seen as credit hungry behavior and can be interpreted as over-dependence on credit to meet financial responsibilities. Therefore, hang on to the 2-3 best cards and let go off others, even if they don’t have any annual or renewal fee attached to them.
- Don’t report high credit usage
Let’s say you have 2 cards each with a maximum limit of INR 50,000. That is, INR 1 Lac of credit is available to you each month. Your average monthly usage is INR 60,000, or in other words you use 60% of your credit limit. This is not good, because creditors don’t like high credit usage, for it tells them that the user cannot manage his finances without credit.
Anything above 40% credit usage is seen as high credit usage. Keep your total credit usage to 30%-40%.
Also spread your usage evenly across your credit cards to prevent reporting high credit usage on any one card. This will ensure that you are positively rated on each card you hold. For instance, continuing with the above example, if you spend INR 45,000 on one card and INR 15,000 on the other, you will be negatively rated on the first card and positively on another. Spending INR 30,000 on each card, however, will ensure a positive report on each card, and this in turn will augur well for your overall credit score.
With help of these tips you can better your score and become eligible for the card you’ve been eying for long. However, once you get the desired card in hand, don’t become careless; otherwise, all the hard work will go down the drain. And you will have to start ALL OVER again—and that is not an inviting prospect, is it?
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