Your CIBIL score plays a very important role in deciding how easily you can get access to loans. While you are paying off loans, it is important to maintain a healthy CIBIL score. A good score opens up doors to better interest rates and financial opportunities. If you are wondering how to improve your CIBIL score while managing loan repayments, here are some simple and actionable tips.
- Pay Loan EMI on Time:
The timely payment of EMI will work as the best way to guarantee a good CIBIL score. If you miss or delay EMI, it indicates that you are struggling to repay. Use automatic options for the payment of EMI like standing instructions or reminders so that you don’t miss any deadline. Paying EMIs consistently will give you the credibility of being a good borrower and slowly improve your credit score.
- Avoid Taking Multiple Loans at the same time:
Loans help to control large expenses, but having too many active loans at a time hurts the credit score. Before granting any loan, lenders check your debt-to-income ratio, and if you are already paying EMIs for multiple loans, it indicates higher financial risk. It not only reduces financial stress but also helps maintain a good CIBIL score to pay off your current loans before applying for new ones.
- Low Credit Utilization:
Credit utilisation refers to the amount of credit used in comparison to the overall credit limit. Keeping this ratio low, ideally below 30% may increase your score overtime. For example, if you have a credit card with a limit of ₹1,00,000, keep the spending amount less than ₹30,000, thus showing that you’re not too dependent on credits and are managing your finances well.
- Monitor Your CIBIL Report Regularly:
Errors in your credit report may be hurting your score without your knowledge. CIBIL report monitoring once in every few months is vital to identify the discrepancies, like wrong account information, overdue payments already cleared, or incorrect personal information. You may dispute these errors and get them corrected to avoid unnecessary damage to your score. Regular monitoring helps you update your credit performance.
- Do Not Close Old Credit Accounts:
Your credit history length also determines your CIBIL score. Longer accounts indicate a more extensive borrowing history, which may be beneficial for you. Even if you do not use some of the credit cards or accounts anymore, keep them active to maintain the age of your credit history.
- Pay Off High-Interest Loans First:
If you have more than one loan, you should pay the high-interest loans first. High-interest loans include credit card debt that increases rapidly and harms your financial health. Hence, you should pay loan with higher interest first, to save cash flow and maintain a good credit history that is beneficial for your CIBIL score.
Conclusion:
Improving your CIBIL score while paying off loans requires great discipline and financial planning. The above tips will work in your favor to improve your CIBIL score. Taking small consistent steps will help you achieve a strong credit score and open doors to better financial opportunities in the future.