How to Improve Your Credit Score in 2024?

Are you looking to boost your CIBIL score and unlock better financial opportunities? This detailed guide provides easy, actionable steps to improve your credit score and make you more credit-worthy.
 

Put briefly, your credit score is a numerical reflection of your borrowing behavior, which reflects your creditworthiness. The CIBIL (Credit Information Bureau India Limited) score is the most prevalent credit score in India. It is a 3-digit numeric summary of your credit history, rating and report, ranging from 300-900. The closer you are to the 900 score, the more positive your credit rating will be. 

A CIBIL score north of 750 displays a strong credit history and betters your chances of obtaining loans. But don’t worry if your CIBIL score is on the lower end.
In this article, we bring to you some actionable steps to boost your creditworthiness. 

Get Rid of Existing Debt

Firstly, consider clearing any existing liabilities to better your credit score. Paying off any debt burdens you have can improve your CIBIL score while reducing any financial stress. Having an actionable debt repayment plan can surely impact your credit score positively.

Maintain Older Credit Cards

Another factor that has a say on your credit score is the length of your credit history. Keep your older credit cards active as it represents a responsible attitude to credit management.

Timely Payment of Liabilities

A healthy credit score is a byproduct of consistent and timely payment of liabilities. Late payments can downgrade your creditworthiness and result in higher interest rates, penalties and eventually a debt trap. 

Make Timely EMI Payments

Equated Monthly Installments or EMIs are fixed payments made at specific intervals for the remittance of a particular service or product. Designed to facilitate affordable purchases of high-value items, a failure to make timely EMI payments can negatively impact your overall creditworthiness. Strategies like setting reminders or automated payments can help with timely payment of EMIs. 

Acquire Loans with Longer Tenure

Go for a longer tenure for repayment of your loans which will likely result in lower monthly EMIs. While it may extend the loan term, it can help build your credit history. Be mindful of the interest rate of longer loan tenure and plan your financial goals accordingly.

Steer Clear of Accumulating Excessive Debt

Avoid taking on excess debt simultaneously as it can make your finances bleak and harm your CIBIL score. A manageable debt-to-income ratio of below 30% should be maintained. You can calculate this by dividing your monthly debt payments by your monthly income. 

Limit the Number of Credit Cards you have

Credit cards often come with numerous payment benefits. However, having an excess of such cards may do more harm than good and raise concerns among lenders. Having multiple credit cards can suggest an overreliance on credit and negatively affect your credit score.

Align your Credit Limit to your Expenses

A high credit limit might seem lucrative to most, but people often tend to overspend because of it. A credit limit on your card that aligns with your income and spending is a smart step toward good credit management.

Build a Varied Loan Portfolio

A mix of credit that spans across multiple sources points to your ability to manage different types of credit responsibly. Include credit cards, personal loans, and mortgages in your line of credit to boost your creditworthiness.

Check your CIBIL Report Frequently for Inaccuracies

Review your CIBIL score periodically to identify any anomalies that can be affecting your credit score. Carefully analyze your CIBIL report and sparse it for any discrepancies that may be reported to the bureau.
 

Restrict the Frequency of Loan Applications

Frequent loan applications may point towards financial instability or desperation for credit and can hurt your credit score. Avoid unnecessary loan applications unless necessary.

Bottom Line

Your credit score is a reflection of your credit habits and financial planning. A good credit score requires consistent efforts and responsibility. The strategies outlined in this article will help strengthen your CIBIL score and improve your chances of obtaining credit in the future. Remember, Rome wasn't built in a day, and neither is your credit score! Be patient and consistent with your financial habits, and a positive score will follow.

For personalized advice on finance, legal, compliance, and tax matters, feel free to reach out to JJ Tax.