Bad CIBIL (credit) score limits your access to credit and can limit your opportunities to financially grow. One can improve CIBIL score by knowing how CIBIL works and making simple financial changes.

A bad score can cost you several lakhs on rupees in interest alone over the tenure of a home loan. Here are 6 very simple steps to improve your credit score and ensure it is in good standing:

1. Review your credit report regularly

Everyone is eligible for an annual free credit report from each of the four credit bureaus in India. You should get your free report and review all the entries in the report. Ensure it is accurate and updated with the latest information. If there is an inconsistency raise a dispute with the credit bureau and get it fixed. How to dispute an entry in your CIBIL/Credit report?

In case of a delinquency, try to clear it and get it to current state. If you have a default and cannot pay it off, try to settle with the bank and close the loan. This will have a longer impact on your credit score if you settle and do not pay the balance in full.

2. No late payments

Always pay all your bills on time. Month after month. It will save you from late fees and other charges. And also help you stay organized and on top of your payments. Payment history is a major component that determines your credit score.

3. Reduce credit usage

Credit usage is the second most important metric that determines your credit score. It is total credit used as percent of total credit available to you. Always pay your credit card bills in full every month. Keeping a balance on the credit card is expensive and will also increase your credit usage. Try to keep credit usage below 30% to maximize your credit score. Also bear in mind that completely discarding your credit is also not advisable as that can also impact your score adversely.

4. Do not close old credit cards

The length of your credit history is another important metric in your credit score. So it is important you have your oldest credit cards open even if you do not use them anymore. The longer you have a credit history with good standing the more credit worthy you are for a banks as you have demonstrated your ability to manage credit well over a long period of time. So pull out your old cards and use them once in a while to keep them current. How can your credit card help you get a good CIBIL/credit score?

5. Spread your credit

Spread your credit across multiple types of products instead of loading into one. So paying off multiple credit products like credit cards, personal loans, home loan, car loan etc. shows discipline and will improve the credit score. Keep in mind that you still need to keep your credit usage to less than 30%.

6. Do not apply for new loans

Every time you apply for a loan from a bank they perform a credit check on you. The number of credit applications on your account will adversely impact your score as it shows desperation. So do not share your private information with any bank or third party that might perform a credit check on you. You can check your credit score any number of times without impacting it.

7. Get a secured credit card

A secured credit card is a credit card backed by a collateral such as fixed deposit. Banks issue secured credit cards to most customers despite their credit score. A secured credit card gives one the ability build their credit score just like any other credit card. Make regular payments in full, and never skip payments. Following these two steps on a secured credit card should help one improve CIBIL score.

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