In today’s world, we need money to make money. With a plethora of banks and lending agencies opening up everywhere, one might think that procuring money will become easier, but this might not always be the case. Lending money involves huge risk and thus almost all financial organizations rely on certain criteria to index the repayment capacity of an applicant. A credit score is perhaps the single biggest determinant when it comes to you availing a loan, which makes it critical for us to maintain our scores.

The Reserve Bank of India (RBI) has made it compulsory that all banks check the CIBIL score of every loan/credit card applicant at the time of evaluation. CIBIL report keeps a track of our past repayment on loans and credit cards. Lenders use this information to understand our repayment intent by analyzing our past and present behavior regarding our credit.

Below is a list of ways, which can considerably improve your CIBIL Score:

1. Settle all balances

First and foremost clear off all the outstanding dues because unpaid outstanding amount month-on-month will reduce your score considerably. Possessing just one or maximum two credit cards is the way to go as it curbs your spending instincts plus it is easier to pay your outstanding amount in time and keep a check and track of your spending behavior. This will go a long way to positively reinforce your CIBIL score. Good financial behavior and discipline are what lenders seek in their customers.

2. Dispute inaccuracies

Make sure that you dispute errors immediately on ( after reviewing your CIBIL report or if you disagree with a particular transaction made through the vendor. Mistakes happen; lenders can also make errors at the time of data entry. It is compulsory for any financial institution to act on those disputes within 30 days. Once the error is resolved, it will show an improvement in your score. Do not apply for new credit without resolving old issues.

3. Use Your Oldest Credit Card

It is erroneously believed that dormant credit card accounts should be deactivated. This is because most people are ill-informed about the impact that it has on an individual’s CIBIL report. Realistically, a good credit card account over a long period of time that has been managed well with timely payments of outstanding is a blessing in disguise. This gives the much-needed impetus to enhance the CIBIL score. So, the crux of the matter to improve creditworthiness is that a robust repayment track record of your credit card must be continued and held on as long as possible. The longer you hold a positive credit card repayment history the better your CIBIL rating scores.

4. Credit utilization

Never ever use your credit card to buy each and everything. You have to keep the 30% rule in mind of credit utilization. Never exceed more than 30% of credit utilization and this will establish not only your credibility for financial discipline and management but will also take your CIBIL score soaring with positivity. When your monthly saving balance is low, it will benefit to reflect a positive CIBIL score.

5. Increased credit limit

Whenever your rating is good, the bank will offer to enhance your credit limits on your credit card and never refuse to get an enhanced credit limit. It need not mean that you have to spend more but it only reflects the confidence of the bank in you. You can also ask your bank to increase your credit limit, as enhanced credit limit always has inherent plus points from rating agencies.

We at Bon work rigorously to empower the gig economy by providing income-generating credit. We increase the credit limit of our customer’s ‘BON Card’ if they timely clear their dues.

6. Get a mixed bag of credit

When it comes to loans there are two types of loans, secured and unsecured. If you take too many unsecured loans, banks tend to see it as a negative and might be inclined towards declining your loans. What you can do to is to take both unsecured loans like personal loans and secured loans like a car or home loan. Credit cards are also accounted as unsecured credit.

7. Information on secured card

Just in case an individual has a bad CIBIL score, then getting a secured card from leading banks against a fixed deposit is the way to go. Leading banks like Axis Bank, ICICI Bank, Kotak Mahindra Bank, SBI, etc. offer a secured credit card against a fixed deposit of nominal amount. When you repay your balances on time, the CIBIL score soars high.

8. Joint application

Many a time one may be a joint applicant for a loan someone else has taken. If they default on payments then it will have a negative impact on your score. You may suffer even when you are not at fault and so to avoid this ensure that the loans and cards are being paid for on time.

9. Don’t settle loans and card dues

A lot of times people choose to settle a credit card or loan. What this means is that they approach the bank and ask for a deal that will allow them to close the debt for an amount that is lower than the actual amount due. While banks do, at times, entertain such requests, the settlement does reflect on the credit report and will have a negative effect on the score or a bank’s willingness to offer fresh credit.

10. Keep the frequency of applications low

One should abstain from applying for credit cards and loan too many times because every time you apply for credit, the bank will ask CIBIL for your credit report and the inquiry will be recorded in the report. This inquiry by a bank may lead to a decrement in your score. This means that you suffer two disadvantages, the first being that you display a credit hungry behavior and the second that your score comes down even if you have every intention and capability of paying back the loan/card on time.