Introduction:
Having a good Cibil score is super important, and there are two main reasons why. First, you can get loans really easily, and second, the interest rates on those loans are also lower. Now, many of you might already have a bad Cibil score, but there’s no need to worry. In this video, we’ll explain in detail the reasons why your Cibil score might be bad and how you can improve it.
What is Credit Score?
Before we get
into how to increase your Cibil score, let's first understand why it gets bad
in the first place. There are many reasons for a low Cibil score. The main one
is if you don’t pay your loan instalments on time. Even if you delay by just a
day or two, your Cibil score will drop.
You’ve probably
noticed that your credit score is going up and down really fast. That’s because
the RBI has said banks need to report your info every week, so your credit
report is being updated weekly. So, what does this mean? First, if you don’t
pay your loan EMIs on time, your credit score will drop. The second reason is
loan inquiries. Often, when you want to take a loan, you end up checking with
multiple banks, and that affects your score.
If you're investing, just ignore this completely. When you do that, your credit score will improve really fast. And one last thing, whenever you take a loan, always make sure not to take it from the market at a high interest rate. You need to do this because if you take a loan at a lower interest rate, your credit score improves much faster. That’s because the system sees that this person is getting a loan at a low interest rate, so it. If they have a good credit score or a good reputation in the market and their credibility is strong, then your Cibil score improves faster there. Now, friends, these are the things you need to keep in mind. I’ve also told you what not to do because that can bring your simple score down, so you need to be careful about that. And to improve, you have to follow the steps I shared. Some things you need to do, and some things you need to ignore. So, keep this in mind to make sure your Cibil score will improve. And friends, if your Cibil score improves, be sure to write about it in the comment box below.
There are also
several loan apps where you can submit inquiries. The more inquiries you make,
the more your score will drop. Why does your score go down because of other
people’s inquiries? Because when you apply for a loan and the bank rejects you,
the system thinks that you need a loan but the bank isn’t interested in giving
it to you. That’s why your score drops quickly. Another reason your Cibil score
goes down, friends, is credit utilization. What is credit utilization? So, if you’ve got a credit card and you’re using up the entire limit on
it, your credit score will drop. If you have a credit card, never max it out
completely. Now, the fourth reason your credit score might go down is because
of high-interest loans. Why does your credit score drop when you take
high-interest loans? For example, if you want to take a gold loan, and there’s a
bank in the market offering it at 9%, then if a bank is offering loans at 12%, then why would you take a gold loan
at 12%? The credit bureau will notice that when there are banks offering
secured loans at lower interest rates, but you still choose a higher interest
rate loan, your credit score will drop. So, you should always try to get loans
at the lowest possible interest rates. Similarly, you’ll see that business
loans are also easily available in the market right now. So, if you take a
business loan with a much higher interest rate if you have interest on loans, your credit score goes down there too. So,
you need to be careful not to take loans with high interest rates. Moving on,
the next reason is your credit report. If you keep checking it regularly, your
credit score drops there as well. Every time you check your credit score on
multiple apps or websites, an inquiry is created, and these inquiries lower
your credit score.
Now, the next
important point is if you have an old credit
card and think you’re not using it, so you decide to close it, your credit
score will actually go down when you close that card. And why does it go down?
Let me explain. Suppose you have a car loan for 7 years. If you keep paying it
for 7 years and then close it, it shows that you had a loan with a fixed term.
But credit cards don’t have a fixed term, so the longer you keep a credit card. The longer you keep your credit card, the longer your credit history
builds up. But if you close that credit card, your credit history linked to it
disappears. So, if you think about closing old credit cards you don’t use, your
credit score will drop. Also, there are two more reasons, guys. First, there
are many Cibil reports with errors. Like, wrong accounts showing up on your
report, which brings your Cibil score down.
Now, look if there's an issue, you'll find the resolution link in the description
box below. Just click on it, and if you raise an inquiry there, and if your Cibil
report has errors that are bringing your Cibil score down, Bank It On will help
you improve your Cibil score and get those errors removed. Now, the last reason
your Cibil score might be low is if you become a guarantor for a third party,
and that guarantor. If someone defaults on a loan or delays payment,
it’s a big issue because the CIBIL score goes down. So, you need to be careful
and never become a guarantor for anyone unless it’s absolutely necessary. These
were the main reasons why CIBIL scores drop. Now, let me tell you how to
improve your CIBIL score, which you’ve been waiting for. And friends, the
solutions I’m going to share are really effective because we’ve helped many
people improve their CIBIL scores using these methods.
So first, let me tell you how you can improve your credit score. The most important thing is to pay the EMIs on any loans you have on time. Also, for all your credit cards, try to pay the full amount on time. Don’t just pay the minimum balance, and don’t pay half either. Use your credit card only as much as you can pay off in full with your next bill. So, once your credit card bill is generated, you need to pay it off in full. If you do that, your credit score will improve. And another thing, friends, never use more than 30% of your total credit limit across all your credit cards. Using only up to 30% is a big factor in your credit report. If you keep your credit card usage under 30% and pay on time, your credit score will improve much faster.
The third thing
you need to do to build a good credit score is to have a mix of the loans you
take from financial institutions. You should have personal loans, credit cards,
business loans, housing loans, and secured loans too. In other words, you need
to have a good credit mix. What this means is that the credit report will check
if you're only borrowing from unsecured sources, then what happens? Your credit score will drop. But if you take credit from a bank where
you’ve mortgaged property, or say you’ve taken a loan against your fixed deposit,
or got a credit card against your FD, that’s a great credit pick. It helps
improve your Cibil score really fast. After that, the next step, friends, is to
take a gold loan. Whether you take a gold loan of 30-40 thousand or a higher
amount, if you take a gold loan, what’s the benefit? First of all the Cibil report doesn’t check the bank. If you’re taking a gold loan
because you’re putting up some security deposit, here’s what happens: when you
take a gold loan, it gets reported in your credit report as a secured loan. And
in the case of secured loans, your Cibil score improves really fast.
After that, the
next step is that you can get a credit card against an FD. Many of you probably
know people whose CIBIL score has dropped completely. This could be for any
reason, like if you recently defaulted on a payment. If your friends nearby
have defaulted, then now if you need any credit or loan, banks usually won’t
give it to you. But if you open an FD (fixed deposit) in a bank and take a
credit card against that FD, the bank will easily give you a credit card. The
bank will give you a credit limit up to 90% of the FD amount you have. And the
benefit of this is that when you take a credit card against the FD and pay on
time. Once your payment is done, your Cibil score will
improve. After that, guys, the next thing you need to do is, whenever you go to
take a loan, never go making multiple inquiries. Go to just one bank. First, go
to your own bank, the one where you have your account. Tell them about your
loan requirement. If that bank doesn’t give you the loan, then go to another
bank. Don’t go making inquiries for your loan with multiple banks or through
multiple apps.
Conclusion:
Hope you liked this blog
post and this will certainly help to improve your credit score. Let me know in
comments if your credit score improved by applying any of these hacks. Also let
me know if you want blog on any specific topic pertaining to Finance,
Investments or Insurance. I’ll be more than happy to write blog post on the
same soon. You feedback through Comments or Contact us section matters to us
for giving you diverse, useful and informative blogs.
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