Different Ways To Improve Your Credit Score For Free

Nov 14th 2023
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Increase Credit Score: Free Ways to Improve Your Financial Health

Different Ways To Improve Your Credit Score For Free, Are you facing loan rejections due to low credit score? If yes, you should feel happy knowing that
there are several ways you can improve your credit score. For any individual facing low credit scores,being aware of these steps is extremely necessary.

Why Good CIBIL Score is Important?

One of the key elements that influences whether your credit application is approved or denied is your CIBIL score. A low CIBIL score can be a significant obstacle for those who need credit immediately, even as a high credit score might make it relatively easier for you to receive a credit card or loan. Obtaining credit cards with additional advantages and loans with comparatively cheaper interest rates can both be facilitated by having a high credit score.

The majority of lenders reject loan applications from candidates with low credit scores (600 or lower). The loan applicant must pay interest at a higher rate even if their application is granted. If your CIBIL score is low and you wish to raise it, you must look at the following steps to see a considerable improvement.

1. Clear All Pending Debts

Make a deliberate effort to pay off your credit card debt by the due date. Nonpayment of dues has a substantial negative impact on your CIBIL score, and repeated defaults can quickly lower your credit score below 600. If you fail to meet the deadline, it will show up in the Days Past Due (DPD) section
of your CIBIL credit report.

In order to prevent the card issuer from reporting the non-payment of the whole balance owed to the bureau, you should attempt to pay the minimum amount owed if you are unable to make the full payment by the deadline. Despite the fact that the outstanding balance will begin to accrue
interest for the billing cycle, you will have an extra cycle to settle your debts and avoid your credit score from reducing.

2. Set Payment Reminders To Avoid Repayment Delays

You will suffer credit score consequences if you are unable to make your loan EMI payments on time. When it comes to making your credit card or loan EMI payments on time, you must be mindful of the situation. In addition to paying the penalties, missing or late EMI repayments could cause a sharp decline in your credit score.

Setting up reminders to return money on time or adding Standing Instructions (SI) to your bank account, where a defined sum will be withdrawn on a regular basis (usually monthly) are the two best approaches to prevent any payment delays.

3. Avoid Multiple Loan Applications

Credit inquiries come in two flavours: gentle inquiries and harsh inquiries. When you check your credit score to become credit conscious, it is regarded as a soft inquiry. It does not affect your credit rating. It is regarded as a hard inquiry when a lender or credit card company obtains your CIBIL credit
report from the credit bureau in relation to your credit application.

Your credit score won't likely be significantly impacted by sporadic hard inquiries. But a string of hard inquiries in a short period of time indicates a credit-hungry nature. Such candidates may be viewed by lenders as having financial troubles and consequently a comparatively higher chance of credit default. This might ultimately result in the lender or card issuer rejecting your credit application.

The credit score of candidates who have made several hard inquiries in the recent past is subsequently reduced by credit bureaus. Therefore, if you want to apply for a credit card or loan, make sure you do your homework, weigh your alternatives, and apply to just one lender. Try to raise your CIBIL score before applying for credit if you have a poor credit score and you can't wait to get credit in the near future.

Also Read This:  Does a Business Credit Card Affect Personal Credit Score?

4. Check And Report Errors In Your CIBIL Report

Even if you may have a clean credit history, your credit score may nevertheless suffer from a number of unidentified mistakes. These mistakes might involve inaccurate personal data, inaccurate account information, mismatched amounts that are past due or paid off, duplicate accounts, inaccurate Days Past Due information, inaccurate collateral information, etc.

For instance, even if you have fully paid off your loan and cancelled the account on your end, the lender's administrative mistake has caused it to be listed as current owing. It might drastically lower your credit score. You must also keep an eye out for any additional mistakes or questionable activity.

5. Avoid a Secured Loan

Credit scores can be considerably lowered by settled credit accounts and late payments. Such candidates would not be preferred by any lender to receive a credit card or loan. Prior to applying for the loan product, you will need to raise your creditworthiness by rebuilding your credit score.

You may choose a secured credit card in lieu of a set deposit in such circumstances. The secured credit card application will be approved quickly because the credit score is not taken into account. Once it's been granted, you may begin repairing your credit by using it carefully and paying your bills on time. Even if it might not rise right away, your credit score might still be beneficial in the long term.

6. Don’t Close Old Credit Card Accounts

Banks are more likely to trust applicants with lengthier credit histories and timely payment records. Therefore, even if you no longer use an old credit card account, you shouldn't get it closed. Even though it might not have a noticeable effect on your credit score right away, it might be useful later
on when a lender is reviewing your loan application.

7. Keep a Check On Your Join Loan Accounts Regularly

A co-applicant with superior creditworthiness may be asked to co-sign or guarantee the loan if the applicant does not fulfil all of the requirements. This is done to make sure that the guarantor can help repay the remaining amount in the event that the borrower is unable to repay the loan.

When an EMI is not paid on time, both the borrower;s and the co-signor's credit scores are negatively impacted. Therefore, if you are a co-signer or guarantor, you should periodically check to see if the loan EMIs are being repaid on time, and if there is a default in the payments, you should
speak with the borrower about it.

FAQs

1. Will There Be a Drawback To Verifying The CIBIL Score?

To evaluate your credit report, you must check your CIBIL score at least once a year. You can choose to have a mild credit check if you would want to monitor your report. However, lenders and other financial organisations will perform a rigorous credit check on your record if you are asking for a loan
or, for example, a credit card. Your CIBIL score will drop as a result.

2. What Is The Duration Required To Raise a CIBIL Score?

One of the most often asked questions about CIBIL score is how long does it take to enhance a credit score. It won't happen overnight that your credit score rises. However, if your credit score is really low, it will often take 4–12 months to raise. Keep in mind that improving your credit score will need
persistence, patience, and financial restraint.

3. What Is The Duration Required To Raise a CIBIL Score?

One of the most often asked questions about CIBIL score is how long does it take to enhance a credit score. It won't happen overnight that your credit score rises. However, if your credit score is really low, it will often take 4–12 months to raise. Keep in mind that improving your credit score will need
persistence, patience, and financial restraint.

4. Which CIBIL Score Is The Greatest And Lowest?

The CIBIL score has a range of 300 to 900, where 300 represents the lowest score and 900 represents the greatest. A CIBIL score of 750 or higher is often regarded favourably by financial institutions and lenders.

The Conclusion

You may have previously examined your credit score; a lot of banks and credit card providers offer dashboards. You now wish to understand how to raise your credit rating. The good news is that, despite your particular credit status, it is achievable with perseverance and hard work.

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