- Date : 25/03/2023
- Read: 5 mins
Learn how long it will take to increase your credit score from 500 to 700. Find 7 sure-shot tips to improve your CIBIL score quickly in 30 days.
Why is a Good Credit Score Important?
A good credit-score can help you get loans from banks and other financial institutions easily and in preferable terms and conditions. In India, the CIBIL score is the most popular credit score. It helps lending companies understand your creditworthiness.
If you have a good CIBIL-score, you may get the following:
- A larger amount of loan
- Loan at a lower rate of interest
- Loan at easier terms and conditions
A credit-score is a 3-digit number that varies from 300 to 900.
- If your score is below 600, the probability of loan approval is low.
- A CIBIL score in the 700-900 range is considered good. Your probability of loan approval increases if you have a good credit score.
If your credit score is hovering around 500, you'll unlikely receive good credit card or loan offers. Once your score reaches above 700, your creditworthiness increases. A good credit score makes lenders believe that you are a financially trustworthy person and, therefore, less risky to lend.
If your credit score is still hovering around 500, consider increasing it above 700. You can achieve this by following certain financial practices. Manage your debt and credit effectively to increase your CIBIL score.
Financial discipline and prudence can help you increase your credit score. However, giving a generalised timeline is difficult because financial situations vary with different people. While it may take a month to increase 100 credit points for some, it may take 45 days for others to witness a 200-point increase in their credit scores.
You can easily increase your credit score by 200 points (from 500 to 700) quickly by paying all your loan EMIs and credit card repayments on time.
You can’t build a good credit score if you routinely:
- Miss your monthly payments or
- Make late payments
Debt repayment history and spending patterns influence the determination of credit score. Keep an eye on these factors to increase your credit score.
Now, let’s explore the top seven ways that can help you increase your credit score fast.
- Repay Timely to Show Lenders that you are a Responsible Borrower
If you repay your loan and credit card EMIs on time, it can help your credit score improve by 200 points quickly. It is always better if you pay off your balance sooner. When you pay off the entire balance, it makes your credit score grow faster. You can also select the auto-pay option to make timely loan EMIs or credit card payments.
Most credit card companies report your statement balance to CIBIL every month. You can expect your credit-score to improve significantly within 30 days of making the full balance payment.
- 30% Credit Utilisation
Financial experts believe you should not spend over 30% of your credit limit. Suppose you have a credit card limit of Rs. 50,000. Experts say you should use at most Rs. 15,000, which is 30% of the Rs. 50,000 credit limit.
- Increase Credit Limit
Suppose you maintained a healthy 30% credit utilisation in the past. Currently, you may find that you are utilising almost the entire credit limit of your credit card due to certain reasons.
In such a situation, you can always lower your expenditure. Otherwise, you may ask your credit card company to increase your credit limit. This will help you maintain a healthy 30% credit utilisation.
- Check Errors in your Credit Report
You should check your credit-report regularly to find errors that could affect your credit score adversely. The most common errors found on credit reports are misreported payments, fraudulent/duplicate accounts, etc.
- Remove Negative Entries from Credit Report
If you find any such error or negative entry in your credit report, you should contact CIBIL and get the negative entry removed. Suppose you have fully paid your debt with one of your lenders. However, the lender hasn't reported it to the credit report. In case of error or negative entry, you should raise a dispute (either under data inaccuracy or ownership/duplicate) by login into myCIBIL.
Also Read: Credit Report - Everything you Want to Know
- Avoid Applying for Multiple Credit-Cards and Loans
We receive numerous phone calls or promotional emails offering loans or credit cards. No matter how lucrative the offer may sound, avoid it if you don't need one. If you apply for multiple loans, each of the lenders will pull up your credit report to check your financial health. It is called a hard credit check. Every time a lender conducts a hard credit check, your credit score drops. Limiting applying for multiple credit cards and loans is best.
- Maintain Older Credit Cards
If you have an old credit card, try to maintain it. Avoid closing your old credit card account even if you are not using it. Keep it open to showcase to lenders that you are a responsible borrower and spend sensibly.
Also Read: Build Credit Score - A Step-By-Step Guide
Financial recovery is not an overnight phenomenon. It requires time and patience. No matter your situation, you should be proactive in financial prudence. Use the tips mentioned above for financial recovery, and you can quickly increase your credit score from 500 to 700.