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Keeping yourself updated on your CIBIL score is one thing while you are looking for a new credit line. If your score seems not very satisfactory or incapable of getting you a new credit facility, you can always think of making it better with time. A minimum period of 3-6 months is required to see a change in the score. However, what score is a good one? What can you do to improve it?
A credit score ranges from 300 to 900 where any score around 300 states that you have not managed finances well in the past. Such a score will give a negative impression on you to the lenders saying you have not paid back the loans on time in the past. Lenders may not want to give you a new loan when you have not paid the previous loans properly.
On the flip side, a score near 900 states that you can be trusted with money and improves your chances of getting a new credit facility. Lenders will be more than happy to start a new transaction with you. You may also get the best deals in terms of the interest rate. According to the latest algorithm, any score above 650-700 means you can manage money well.
There can be many reasons for you to miss the payments on time, i.e. you could be at a tough phase, forgot the last date of payment, or crossed the credit limit unknowingly. These issues can be resolved and the score can be improved.
Another advantage of getting an increased credit limit is that the credit utilisation will reduce as compared to the available limit. This is a good indicator that you have control over your expenses and can give you an edge in terms of credit score. However, you must not go overboard and spend beyond your repayment capacity.
You can also request the bank for a decrease in the credit limit if you are just holding on to a card to stay on par in terms of credit score. If you have multiple credit cards from the same bank, your actual credit limit will be distributed among the cards. In this case, choose the proportion of credit limit based on your usage statistics to make it profitable.
If you have had a long, well-maintained relationship with the bank, the bank will analyse your situation and give you leeway in deferring the payments. The bank may do some adjustments such that missing payments won’t hamper your credit score.
It is recommended to hold on to all the credit cards you own even if it means to make a transaction just for the sake of formality to keep your card operational. The number and types of credit facilities you are managing matters in improving your credit score.