How to Improve Your CBIL CREDIT SCORE?

How to Improve Your CBIL CREDIT SCORE?

What is a 'Credit Score’?

The money credit that you get is basically OPM – Other People’s Money!

Once you get the money as a loan the system starts tracking you. It starts monitoring your repayment. It follows your repayment schedule and checks each and every time whether you are repaying the due amount/EMI before time, on time or late.

Based on your payment history over a period of time you start scoring points. This leads to the generation of your CREDIT SCORE.

The Point to Remember is –

Your credit score is decided by how well you repay the money borrowed by you. You may have borrowed money from bank in the form of various loans, or you may be using credit cards of various banks for your expense.

So, your credit worthiness is not decided by how well you use other people’s money. It is decided by – your payment of EMIs / amount due on, before, or later than the due date.

In today’s world of digital economy your credit score is stored online by CBIL and other agencies authorised by RBI. If you apply for a loan, the party can go online and check your credit history using your PAN and AADHAR number.

If your credit score is not healthy your loan will be out rightly rejected. The lenders will not believe your argument; they will believe your credit score.

The credit score ranges from a minimum of 300 to a maximum of 900 points. 700 to 720 is considered to be a decent credit score to qualify for a loan. If you are missing the mark then your loan application will be rejected.

Now, let’s take a situation – Due to some financial misadventure of the past an individual is having a credit score that is below 700. He wants to improve his credit score. The problem is that he is not getting any loan or credit card to use so he is struggling to improve his score. What should he do?

One Way to Improve Your Credit Score:

Taking loan, using credit card and then repaying the amount on or before due date is a sure shot way to improve your credit rating.

But if the bank is not willing to give you loan or credit card how will you improve your credit rating?

The answer is – Go for ‘SECURED CREDIT CARD’.

WHAT IS SECURED CREDIT CARD?

A secured credit card is issued by selected banks with a credit limit backed by a Fixed Deposit that you open with the issuing bank.

Let me explain in detail.

Say, you want a secured credit card and approach the bank. They will first ask you to open a Fixed Deposit (FD) with them for a certain amount. This amount will be based on the credit limit that you are looking to have on your credit card. The bank will offer you 80% of the FD amount. So, if you open a FD for Rs. 10,000/ (Rupees Ten Thousand), you will get a secured credit card with a credit limit of Rs. 8,000/- (Rupees Eight Thousand Only) which is 80% of Rs. 10,000/-.

There are only few leading banks like Axis, ICICI, SBI etc. are offering secured credit cards. You will have to enquire with your bank if they are one of them. Plus, each bank has its own criteria of minimum Fixed Deposit Amount that you need to open to be eligible for Secured Credit Card. Like, the bank I enquired with, asked me to open a fixed deposit for Rs. 20,000/- or more.

They will also charge you an annual fee applicable to the credit card. Well, even if it’s your own money, you have to pay a fee to use it.

Once you open the FD account you will receive your secured credit card the next day.

Now you can start using your Secured Credit Card like any other credit card.

A Word of CAUTION:

Do not use the entire limit of your secured credit card. This shows that your survival depends on that card. It might go against you. Even though the advertisements inspire you to use your credit cards to do your shopping, take charge of your emotions and use your secured credit card to buy only what is important or during emergency.

Limit your per month spending to 30 – 40% of your overall credit limit. This way you will be in good books of the agencies keeping track of your credit history.

In Conclusion

What I mentioned above is just one way on How to Improve Your CBIL CREDIT SCORE.

Taking up loans or credit cards is one effective way to make your Credit Score rise.

But Beware!

Any kind of loan or credit cards is like fire. If you don’t learn to manage it, they can destroy your life.

Using your Secured Credit Card take baby steps and learn how to use credit cards without getting burnt. Get into the habit of repayment of the due amount on or before the due date. It is better if you pay your dues before the due date. It will go in favour of you and your credit score.

If you have any other suggestions do express it in the comment below. It will help me and other readers to become wise while using credit cards and also improving our Credit Score.

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