CIBIL score is a three digit number that showcases your creditworthiness and repayment capacity. Finance companies consider this a crucial parameter when evaluating your Personal Loan and other loan applications. A good CIBIL score above 750 helps you get easier loan approval at better interest rates and terms. On the other hand, a lower score of 500 or below can restrict your ability to borrow credit or attract higher interest rates.
In the following sections, we will discuss how to increase CIBIL score from 500 to 750. With these tips, you can quickly boost your credit score and improve your chances of getting loan approval with favorable terms and conditions.
How to Increase CIBIL Score from 500 to 750
A high CIBIL score determines if you can get a Personal Loan or another type of required financing in time. Credit bureaus have a database of your credit history, based on which they calculate your credit score. The higher your CIBIL score, the higher your chances of getting credit. Want to know how to increase CIBIL score from 500 to 750? Here are a few smart tips:
Lowering Credit Utilization Ratio
Ideally, you must try to keep your credit utilization ratio below 30% to keep up your CIBIL score. On the other hand, above 40% ratio will harm your credibility. So if you have been using your credit card too often, reconsider your spending habits. Using too much credit on a regular basis projects you as credit-hungry and decreases your credit score. However, not using credit at all does not help either. So use up to 30% of your credit limit to improve your CIBIL score.
Avoiding Closure of Older Accounts
You might think that old credit cards you no longer use will be automatically deactivated. However, that's not true. Old cards with zero outstanding balances are a boon in disguise for your credit.
Retaining them will give an impressive boost to your credit score. Therefore, hold on to them instead of closing them even if you no longer use them. The age of these cards will prolong your credit history and make their credit limit available to keep your utilization ratio down.
Improving Payment History
Always remember to pay your loan EMIs and credit card bills on time. Making late payments and missing due dates will directly affect your credit score negatively. Timely payments also reflect your responsible approach towards credit and financial management, thus increasing your credit score. Enable auto-pay options or set up reminders to avoid missing even a single due payment.
Monitoring of Credit Reports
Errors in your CIBIL report, such as incorrect details, inaccurate reporting, and wrong account information, may keep your CIBIL score down despite your best efforts to raise it. That is why it is always advisable to monitor your credit report regularly to identify any errors in time. If you spot an error, raise a CIBIL dispute and get it rectified to give an instant boost to your CIBIL score.
Multiple Credit
Wondering how to improve CIBIL score from 500 to 750? You can do that by diversifying your credit portfolio. For that, you must maintain the right balance of secured and unsecured credit options in your portfolio with both short and long tenures.
Avoid Inquiries about Credit Cards
If you want to apply for a credit card, investigate online and choose the best card option rather than applying for a credit card from multiple providers. Since each application will pull a hard enquiry on your credit report, they will reduce your credit score by a few points. So while trying to improve your CIBIL score, compare and decide rather than submitting multiple applications simultaneously.
Pay EMIs on Time
Paying your current loan EMIs on time is a healthy repayment habit that improves your credit score over time. Timely EMI payments showcase responsible credit behavior and sufficient repayment capacity, convincing CIBIL to assign you a higher credit score. Conversely, missing even a single EMI payment will put a dent in your credit history.
Always Pay the Complete EMI Amount
During a financial crunch, you may let your debt rack up by paying only the minimum due amount. The strategy may keep your account open. However, the interest on the outstanding amount will keep accruing until full repayment and hold down your CIBIL score. On the other hand, paying the full EMI amount each month will improve the score from 500 to 750 in some time.
Pay Off Your Card Balance via a Personal Loan
Paying off outstanding debt with a Personal Loan is called debt consolidation. It is an excellent strategy to pay off the card balance and save from paying a higher interest towards it. Personal Loans have lower interest rates and easier repayment terms than credit cards. As the repayment becomes easier with debt consolidation, you can rebuild your credit score from 500 to 750.
Also Read: How to Increase Cibil Score - 6 Ways to Improve Cibil Score
Benefits of Good CIBIL Score
Now that you know how to improve your CIBIL score from 500 to 750, you must be wondering what benefits you will get with so much effort. Let’s talk about the most important ones below:
Quick loan Approval
Are you considering Personal Loan online? Your approval will largely depend on your CIBIL score. When you apply for a loan, the lending institution will determine your creditworthiness by looking at your credit history. That is why they expect a CIBIL score of 750 or above to approve loan applications quickly.
Low-interest Credit
By achieving a CIBIL score of 750, you can increase your negotiating power to get a lower interest credit. Lenders perceive you as low-risk borrowers and try to attract you by offering you a lower interest rate. You get the funding you need at lower rates, and the lender receives a higher repayment assurance. So it's a win-win situation for both.
Less credit Risk
Improving the credit score displays responsible credit behaviour, making you a low-risk borrower for credit providers. Since they see less credit risk in lending to you, they provide you with better offers and lower rates on credit products.
Credit card Benefits
Maintaining a high credit score by paying your bills on time makes you eligible for various credit card benefits, like lower interest rates, discounted shopping, cashback, free gifts, higher credit limit, etc.
Conclusion
If you want to know how to increase CIBIL score from 500 to 750, get ready for some consistent effort and strategic approach. Follow the smart tips discussed here to boost your credit score and build a healthy profile gradually. Patience and persistence will help build a strong credit history, improving your eligibility for a Personal Loan at better rates and terms.
FAQ
How to increase CIBIL score from 500 to 750 without a credit card?
Paying current loan EMIs on time, diversifying the credit portfolio, rectifying errors in the credit report, and consolidating debt with a Personal Loan are the best ways to increase your CIBIL score from 500 to 750 without a credit card.
Can you recover from a 500 credit score?
Yes, you can recover from a 500 credit score with consistent effort and responsible credit behaviour. Pay your due amounts on time, reduce your DTI ratio and CUR, and diversify your credit portfolio to increase your credit score fast.
