How to Increase Your Credit Score Fast

How to Increase Your CIBIL Score: Overview

Staring at your credit report, wishing your score drop never happened? Well, that might not happen on its own. 

Having a low credit score can cause some major problems like not getting a loan or getting a loan at a higher interest which adds up in the long run. But don't worry, not having a good credit score is not the end of the world. A credit score is not a fixed score that can not be changed after it is reduced. So, don’t worry. You CAN improve your credit score. A CIBIL score, which you also may know as a credit score, is a numerical three-digit representation summarizing your financial history and behavior. It ranges from 300 to 900 and shows how well you've managed credit before.

What is a Good Credit Score?

7 Best Ways to Increase Your CIBIL Score
 

1. Pay your bills on time

Paying your bills on time is one of the most important things you can do to improve your CIBIL score. Even one late payment of your bill can hurt your score. These bills include your rent, electricity bill, phone bill, etc. So it's important to set up automatic payments or reminders to make sure that you never miss a due date. Even one late payment can affect your credit by 80- 100 points if you have an excellent CIBIL score.

Also Read: How to Get a Personal Loan for a Low Credit Score?

2. Reduce your credit utilization ratio

Your credit utilization ratio is the amount of credit that you use compared to your total available credit. So, to measure your total credit utilization ratio, you need to divide the total credit you are using by the total amount of credit available to you.

Credit utilization ratio = (Total credit balances / Total credit limit) * 100

For example, if you have a total available credit limit of Rs 1,00,000 you should not use Rs 30,000

Aiming to keep your utilization below 30% is a great way to keep your credit score healthy. If you have a high utilization ratio, try to pay down your debt or increase your credit limit so you come under the 30% credit utilization range which will be great for your CiBIL score. 

3. Avoid opening many new credit accounts at once

Every time you apply for a new credit account, a hard inquiry is placed on your credit report. A hard inquiry is when a lender or company requests to review your credit report as part of the loan application process. Too many hard inquiries can lower your credit score. Try having limited credit accounts or opening credit accounts after decent intervals of time. This will help you to have a healthy credit score. 

4. Challenge any errors on your credit report

Check your CIBIL score regularly for any errors and dispute them immediately on cibil.com. You can check your credit score online for free from INDmoney and www.cibil.com. Checking your credit score can help you see how the credit you have utilized is affecting your CIBIL score. This way, you can analyze your financial habits and rectify any errors you have made which has decreased your credit score. 

5. Become an authorized user on a credit card 

Become an authorized credit card user to build your credit history, even if you don't have a credit card of your own yet. 

What do you mean by an authorized user, you ask? An authorized user of a credit card is someone who is added by the owner of the credit card. The authorized user can utilize the credit but the responsibility of repaying it remains with the card’s owner. Just make sure the primary credit card user has a good long credit history, as it might affect your credit score poorly if the user doesn't have a good credit history.

6. Get a secured credit card

A secured credit card is a distinctive financial tool that is designed to provide an accessible credit route, especially catering to individuals who have bad or non-existent credit histories. Unlike conventional credit cards, it is necessary to make an initial deposit from the user as a safeguard. This upfront cash collateral acts as a safety net for the issuer, as it can be utilized to settle any outstanding dues that the cardholder fails to make a payment.

7. Pay down your debt

Imagine your credit score as your financial reputation. When you borrow money and pay it back on time, you prove to lenders that you're trustworthy. Paying off your debt, especially consistently and over time, acts like giving positive testimonials to your financial reputation.

This makes lenders more comfortable lending to you in the future. Improving your credit score makes life a bit easier when you need to borrow money again. The more you show you can handle debt responsibly.

Also Read: RBI releases new credit card rules: Top things you need to know

Here are some more additional tips that may help you improve your credit score fast:

• Pay More than Minimum:
  • Pay more than the minimum amount on your credit cards to reduce your debt faster and improve your credit score quickly.
     
• Lump-Sum Payments:
  • When feasible, make substantial lump-sum payments, particularly on high balances, for a notable credit score uplift.
• Debt Consolidation:
  • Combine all your debts into one loan to make it easier to manage with just one monthly payment.
     
• Credit Counseling:
  • Seek a credit counselor for personalized advice, budget creation, and development of a strategic debt repayment plan.

Remember, commitment and strategic actions toward your debt can give you noticeable improvements in your credit score, which will help you to unlock better financial opportunities in the future.