Is Your CIBIL Score Low? Learn How to Improve It Easily
This score reflects how responsibly you borrow and repay money. Essentially, your CIBIL score is an assessment of your financial health, based on factors such as your repayment history, outstanding debt, and credit utilization.
New Delhi: Many people face difficulties when applying for loans due to a low CIBIL score. A good CIBIL score, also known as a credit score, is crucial when seeking a loan from a bank. If your CIBIL score falls between 300 and 900, it is considered acceptable. However, if your score is below 650, securing a loan might be a challenge.
Let’s explore what a CIBIL score is, its importance, and how you can improve a low CIBIL score.
What is a CIBIL Score, and Why Is It Important?
When you apply for a loan or credit card, banks first check your CIBIL score. This score reflects how responsibly you borrow and repay money. Essentially, your CIBIL score is an assessment of your financial health, based on factors such as your repayment history, outstanding debt, and credit utilization.
If you have a high CIBIL score, not only will you have better chances of getting a loan, but you may also qualify for lower interest rates. On the other hand, a low CIBIL score can hinder your ability to get a loan or credit card, or result in higher interest rates.
Why Does Your CIBIL Score Drop?
Several reasons can contribute to a low CIBIL score. Some of the primary causes include:
- 1. Late Payments: Failing to make timely payments on loans or credit card bills negatively impacts your score.
- 2. High Debt: Borrowing large amounts can make banks doubt your ability to repay, thus lowering your score.
- 3. Overusing Credit Cards: High spending on credit cards without fully paying the bill each month can damage your CIBIL score.
- 4. Lack of Credit History: If you’ve never taken a loan or used a credit card, banks may be hesitant to lend to you because they don’t have enough information about your borrowing habits.
Consequences of a Low CIBIL Score
A low CIBIL score can make it difficult to get a loan or a credit card. Even if you do secure a loan, it might come with higher interest rates. Therefore, improving your score is essential for better financial opportunities.
Easy Steps to Improve Your CIBIL Score
If your CIBIL score is low, here are some simple ways to improve it:
- 1. Make Timely Payments: Ensure that all your loan and credit card payments are made on time.
- 2. Reduce Debt: Pay off existing loans to reduce your overall debt burden.
- 3. Limit Credit Card Use: Use your credit cards sparingly and make sure to pay the full bill each month.
- 4. Avoid New Credit: Do not apply for new credit cards until your score has improved.
- If these steps don’t work, consider seeking advice from a credit help agency.
- How to Check Your CIBIL Score for Free?
Paytm, a popular mobile wallet app, now offers a feature to check your CIBIL score for free. You can view your credit report, including active credit cards and loan accounts, directly through the app.
Improving your CIBIL score is essential for financial stability, and by following these steps, you can enhance your creditworthiness and secure better loan opportunities.
