CIBIL score determines your worth as a borrower, and any score below 750 makes you a liability in the eyes of the lender. In case your score is less than 750, it is advisable to improve it to increase your credit chances.
In this article, we will discuss in detail how to improve your score from 500 to 750.
You can follow the below-mentioned steps to get your score from 500 to 750.
A bad credit history, such as defaulting on EMIs or taking out too many loans, might result in a lower credit score. While there is very little you can do about bad credit, you can enhance your credit and develop healthy financial practices to gradually raise your score.
Too many unsecured loans can lower your credit score. You should try to balance your portfolio by asking for a secured loan, which is better suited to your profile.
Diversify your portfolio with short and long-term loans, including unsecured and secured loans.
If you use a credit card, you can quickly enhance your credit score. Simply monitor the credit use ratio of the card without exceeding it each month.
Your credit card purchases mirror your financial habits. To be considered a good borrower, you must not exceed 30% of your credit limit.
If you have too many credit cards open, close any that aren't being utilized. It is preferable to cancel a card with a bad history. Never stop using an old card that has an excellent track record of paying bills.
Your credit score will be directly affected by the consistency with which you make your repayments. If you miss your monthly EMI or pay it late, you will incur additional costs and your credit score will fall slightly.
With timely repayments, your CIBIL score and creditworthiness as a borrower will gradually improve.
Pay the full amount due rather than the minimum balance to avoid collecting interest on the remaining balance.
When you approach a lender for new credit, they will undertake an inquiry to assess your borrowing history. This is referred to as a hard inquiry.
Hard inquiries produce a considerable reduction in credit ratings. Multiple credit inquiries from the lender can further reduce your chances of getting credit because they degrade your score.
However, soft inquiries will not impact your credit score.
Instead of straining to pay many EMIs each month, consolidate your debts into one and pay a lower EMI. This will not only minimize your financial load but will also allow you to make monthly payments and keep your credit score from declining.
To keep your credit score from being negatively impacted, you should check your credit report at least once a month for errors, fraudulent transactions, and discrepancies.
A CIBIL score of 700 or above is regarded as good by the lenders, and a score higher than 800 is considered excellent. A good CIBIL score may help you obtain the appropriate loan amount at a low-interest rate. With a CIBIL score of 750 or above, you will easily get a loan on your desirable terms with the lowest interest rate possible.
Many reasons could affect your CIBIL score:
If you use more than half of the credit limit established by your lender, your credit score will suffer. The credit limit is determined by your income and restricts your expenditure. Using more than 50% of your credit limit may indicate financial irresponsibility, resulting in a worse CIBIL score.
Unpaid debts may indicate a lack of financial discipline. This can significantly reduce a person's credit score. To prevent this situation from happening, borrowers must repay all or most of their existing loans before applying for a new one. At the least, be consistent in your loan repayments so your borrower profile reflects well to the lender. This allows you to increase your CIBIL scores and avoid being swamped with debt.
The most common cause of a low CIBIL score is late payment of loan dues. Even a one-day delay in payment can reduce your credit score. It indicates to lenders that you are unable to pay your bills on time. As a result, your creditworthiness may suffer.
Multiple loan applications in a short period can hurt your credit score. While your need for money may be genuine, taking out small loans from several lenders raises concerns among lenders about your ability to repay so many loans on time.
Credit score is one of the most important factors in determining your eligibility for a loan or a credit card.
To increase your score from 500 to 750, you must practice healthy finacial habits consustently. It will take some time to see a positive impact on your score, so take correct measures and maintain discipline.
It can take atleast a year or more for your credit score to go from 500 to 750.
Lenders do not extend loans to borrowers with 500 credit score. You must increase it to atleast 650 and above to get credit from online lenders.
There is no quick way to increase your score. However, you can take a small personal loan or credit card and pay your bills or EMIs on time to see a significant increase over time.
You can’t increase your score in 30 days. Your credit report takes 45 days or more to update and even then, you can only see negligible changes.
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