Credit Score

6 tips to improve your Credit Score fast

How to improve your credit score fast

You have applied for a credit card recently.

But much to your surprise, your application got rejected, thanks to your poor CIBIL score.

And now, you are looking for quick ways to improve your credit score.

Let me debunk a myth here: the path to improving your credit score is not as ‘fast’ as you may want.

And if you are looking to improve your score in a day or in a month, I am sorry that there are no shortcuts.

The reason being that your credit score is an indication of your financial behavior.

And like any behavior, your financial behavior also builds over time. CIBIL Score is just a reflection of that behavior over a time frame of 36 months.

That means you need to practice financial prudence and healthy behavior for at least 6 to 12 months before you will see an improvement in your CIBIL score.

 

Here are 6 steps to increase your Credit score fast

#1 Clear your outstanding balances immediately

If your CIBIL score is bad (Check it here), ensure that you clear all your unpaid credit card balance immediately.

And yes, I am talking about the entire balance and not just the minimum balance.

If you pay just the minimum balance, your CIBIL score will still go down. Why?

It’s because moving your balance to next month is a sign of your inability to pay back the credit and it impacts your CIBIL score negatively.

If possible, take a personal loan (which starts at 18% p.a) and use it to pay your credit card balance (which starts at 36% p.a.). Then pay back your personal loan aggressively.

However, since you are already revolving credit, there is a high chance that you won’t be able to get a personal loan either.

As a second measure, take help from friends and family to pay back the credit you have defaulted upon and return them the money as and when possible.

 

#2 Opt for a secured credit card

If you have a bad credit score and you don’t own a credit card yet, chances are high that no bank will be ready to offer you a credit card.

The good news is that you can still opt for secured credit cards wherein you need to deposit a fixed amount with the credit card company as a security for the credit card.

As long as you pay your credit card bill on time, your security will remain untouched.

This not just keeps you in check but is also the best way to improve your credit score in the shortest possible manner.

All payments made against this card send a signal to CIBIL that you are able to pay back your credit in time.

 

#3 Operate within a safe credit utilization ratio

If your credit card offers you a credit limit of say 1 lakh rupees, it doesn’t mean you should consume it to the fullest.

As a regular user, never go beyond 30-40% of your credit limit. If you have a higher need, make use of the second card than buying on the same card.

A frequent higher credit utilization indicates that a person is frequently needing credit, and thus a higher probability of him defaulting on the loan.

So stay within the safe range.

To signal CIBIL that you have a good credit rating, you need to show that you don’t need a credit.

Ironic but true.

 

#4 Opt for a higher credit limit

This is an extension of point #3.

If you know your credit utilization is high, request the bank to increase your credit limit on the card.

That will ensure that the credit utilization ratio will remain low.

This sends an indication to CIBIL that your need for credit (as a percentage of what’s approved) is low.

 

#5 Get your CIBIL report & dispute balances

Check your detailed CIBIL report.

If you find an anomaly or a charge which is incorrect, raise a dispute with CIBIL and get it resolved.

This is a paid service by CIBIL but totally worth it. If a dispute is successfully resolved, it will be a shot in the arm for your credit rating.

CIBIL Credit Dispute Process

This is the only method that gives results overnight.

It’s because previous records are updated to highlight the error and that makes an immediate impact on the CIBIL score.

 

#6 Don’t apply for a new credit application

If your CIBIL score is on a downward trend, don’t apply for any new loan application for the next 10-12 months.

When you apply for a loan (be it of any type like personal loan, home loan, vehicle loan or a credit card), your CIBIL report is checked in detail and it is considered as a hard check.

More the number of hard checks on your PAN number, worse will be your CIBIL score.

It’s because this is a signal that you are loan hungry and don’t have enough income to satisfy your consumption.

Needless to say, this also highlights an increased risk associated with you returning the credit. And that’s what CIBIL reflects back in form of a bad score.

 

Conclusion

As I mentioned earlier, there are no methods to improve your CIBIL score overnight.

Generally, it takes anywhere between 6 to 12 months to improve the score, and sometimes even higher.

Just improve your money related habits and you will gradually see an improvement in your score.

And if you still haven’t checked your CIBIL score, check it for free here.

Tushar Jain

About Tushar Jain

Tushar Jain is a personal finance enthusiast who loves to talk about money, savings, investments and spending. He blogs about financial wisdom and income growth habits at this blog jaintushar.com. Contact him to say Hi.
View all posts by Tushar Jain →

Leave a Reply

Your email address will not be published. Required fields are marked *