CIBIL Score: Classification & Steps to Improve

Improving a credit score typically takes several months and a lot of patience. There are no quick fixes for boosting your CIBIL Score; instead, you must remain committed to making the necessary improvements to your credit score. If you have a low credit score, getting a new credit card or obtaining a loan may be difficult. Before providing you any credit, almost all banks and other financial organisations do a credit check on you. Your credit score has an impact on your creditworthiness, making it more difficult to get your loan application approved. Your credit score is influenced by your ongoing debt, repayment history, new credit applications, and other things.

A credit score or credit report is commonly used by banks to determine if a person is creditworthy and hence eligible for a loan or credit card. Your credit score could affect your ability to meet your financial responsibilities. The better your credit score, the more likely you are to get approved for a credit card or a loan. Even if your credit application is approved, your credit score will still decide the amount of money you can borrow. As a result, maintaining a high CIBIL score is critical.

Classification of CIBIL Score

Above 800

Excellent

751-799

Good

700-750

Fair

300-699

Very Low

The table above shows that the CIBIL score can be classified into four categories that are as follows:

  1. Above 800- A CIBIL score of 800 or higher is considered exceptional, and banks are likely to offer the greatest possible interest rate to applicants in this category.
  2. CIBIL score of 761 to 799- A CIBIL score of 761-799 is regarded as a Good CIBIL score, with banks more likely to approve their house loan application.
  3. Score of 700 to 750- This group of borrowers has a lower chance of obtaining a personal loan accepted, and even if they do, they will be charged a very high interest rate.
  4. CIBIL of 300 to 699- Applicants who fall within this area are deemed high-risk, and banks are more likely to reject their applications.

How to Increase your CIBIL Score

If you have a low CIBIL score, there are various methods on how to improve your CIBIL score. Some of those methods are as follows:

Improve Your Payback Habits

Making on-time credit card and loan EMI payments can help you improve your repayment history. As a result, your credit score will rise. If you miss a credit card or loan EMI payment, your credit score will suffer. As a result, if you want to enhance your credit score, work on improving your repayment habits.

Don’t Close Old Accounts

Many people believe that closing old accounts will improve their credit score. This is a misconception, and it is recommended that past accounts be kept in order to improve credit scores. Credit agencies prefer older accounts because they indicate the borrower’s long-term relationship with the lender or bank.

Use Less Credit

When banks evaluate your credit score, the credit utilisation ratio is an important component to consider. Maintaining a credit utilisation rate of less than 30% of available credit limit is particularly recommended for keeping a decent credit score.

Balanced Credit Mix

Combining secured and unsecured loans can like best credit cards result in a balanced credit mix. Because secured loans are usually long-term, they help to improve credit scores. A lengthier repayment period on a house loan reflects the borrower’s capacity to make regular payments over time.

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