TransUnion CIBIL, a member of the American multinational TransUnion Group, is a credit information agency operational in India since 2000. It studies the creditworthiness of both individuals and businesses and maintains records on over 600 million individuals and 32 million businesses. It is the most popular credit information agency among lenders.
TransUnion CIBIL assigns the CIBIL score, which is essentially an electronic representation of one’s creditworthiness and repayment capacity. Lenders check it to assess whether a loan borrower can be trusted with timely loan repayment of loan EMIs and repay the loan on time without defaulting. A CIBIL score in the range of 750 to 900 is considered excellent and helps individuals negotiate loan terms and conditions.
A CIBIL score above 800 helps loan applicants get easily approved for a loan, secure substantial loan funds, and also negotiate for a low loan interest rate, among other things. Any individual planning to get a housing loan is therefore recommended to improve CIBIL score above 800 before initiating the home loan application process. In this guide, we look at some tips on how to improve your CIBIL score above 800.
Tips to Help You Increase Your Credit Score
Build a Clean Repayment History
Your repayment history accounts for 35% of your CIBIL score and therefore, is the most important factor that affects your CIBIL rating. Paying all your EMIs and loan bills on time will help you build a strong and clean repayment history. Therefore, if your focus is on increasing your credit score, never miss an EMI and credit card bill payment due date. You can consider setting up reminders to avoid late payments and penalties.
Make Sure Your Credit Utilisation Ratio is Below 30%
The credit utilisation ratio is the ratio of credit used to the total credit available to you. For instance, if the total credit limit available to you through all your credit cards is Rs.2 Lakh out of which you are currently using Rs.50,000, your credit utilization ratio would be:
(50,000/2,00,000) x 100, i.e. 25%.
A credit utilisation ratio under 30% is considered low and it indicates low dependency on credit. Consequently, people with a low credit utilisation ratio can secure loans on more promising and beneficial loan terms and conditions. To improve your CIBIL score above 800, never let your credit utilisation ratio exceed 30%. Always pay off all your credit cards at the end of each month and use your credit cards wisely and only when you can afford to pay the entire amount due at the end of each month.
Maintain Old Credit Cards and Loan Accounts
Your credit history is important too. The older your credit history, the better will be your CIBIL score. Therefore, loan applicants must always maintain their credit history and credit cards and loan accounts. Avoid closing old loan accounts and credit cards.
Maintain a Healthy Credit Mix
You must maintain a healthy mix of both secured and unsecured loans. Secured loans are loans backed by assets or security. Home loans and loans against property are examples of secured loans. On the other hand, unsecured loans are loans that do not involve any security or asset. Lenders sanction these loans based on the repayment capacity and creditworthiness of the loan borrower. Individuals who have a mix of both secured and unsecured loans are considered more creditworthy as these people have demonstrated their ability to handle all kinds of debt.
Avoid Multiple Credits Simultaneously
To understand your creditworthiness, lenders assess your credit report, which gets registered as a hard inquiry. Too many credit enquiries indicate excessive dependency on credit and therefore, can lead to a low CIBIL score. Therefore, apply for loans only when necessary.
Final Words
Those planning to get a housing loan must mandatorily improve their CIBIL score above 800. Reading about and understanding the factors that affect CIBIL scores allows people to quickly improve their CIBIL score and then maintain it too.