Whenever you apply for a personal loan, a credit score is used as a yardstick to determine your eligibility and interest rate. The Credit Information Bureau India Limited (CIBIL) calculates the score by considering various parameters and lies within 300-900. A score higher than 750 is deemed good and helps you secure better deals on future borrowings.

A low credit score could be due to several factors such as inconsistent repayment behavior, higher credit utilization ratio, a large number of debts, including several unsecured loans, and more. However, your CIBIL rating can improve through simple measures.

Here are seven ways to rewrite your credit history and revive your CIBIL score:

1. On-time repayments

Whenever you apply for a loan, lenders will immediately evaluate your credit history and repayment capacity before sanctioning. Timely repayments are the foundation for building a solid credit score.

If you have a habit of missing deadlines, it’s better to use calendar reminders or standing instructions to automate payments to ensure on-time repayments.

2.Limited Credit Utilization

Another important factor that significantly impacts the credit score is the credit utilization rate. It is calculated by dividing the amount of credit utilized by the credit limit offered to you. The higher the credit utilization ratio, the lower is the credit score. Keeping the utilization rate at around 30% is recommended.

If your total credit card available credit is Rs.10,000/-, then it is advisable to utilize Rs.3,000/- to maintain a good credit score.

A #ProTip here is to maintain old credit cards. As long as it’s not incurring fees, old credit cards can help build a strong credit history. Closing an older account will increase the credit utilization ratio, which is detrimental to a good credit score.

3. Review CIBIL reports

Keep a close watch on the CIBIL report for any inaccuracies. Monitor your credit report periodically for any errors or inaccurate information.

If you find something out of place, resolve the issue by filing a CIBIL Dispute Resolution form online and setting your credit record straight.

4.Diversify credit forms

It is essential to have the right mix of unsecured and secured loans of long and short tenure to build a strong credit score. Too many unsecured loans are considered risky by lenders. Always maintain a balance to demonstrate your credibility and repayment ability.

5.Choose long-term loans

When you have a longer tenure for repayment of funds borrowed, the EMI amount is lower, which can help ensure timely repayments. By spreading out the loan amount across a longer-term, you can minimize the burden and improve your credit scores as you’ll have an adequate buffer to repay your loans on time.

6.Avoid taking too much debt simultaneously

It will always be beneficial to take a loan and repay and then take another to maintain a good credit score. Too much debt at one time will increase the liabilities and will reflect the insufficiency of funds leading to a poor credit score. Therefore, avoid taking multiple loans at the same time to prevent your credit score from tumbling downwards.

Paison ki Seedhi Baat

A good credit score will enhance your creditworthiness. All you need to do is make conscious efforts consistently to set your credit record right. Start today and rebuild your credit scores to secure the best deals.

Use the MyMoney app to track your incomes, expenses, savings, and EMI payouts, and never miss a deadline!