When it comes to pursuing higher education, many students and their families rely on education loans to fund their dreams. However, obtaining an education loan is not always a straightforward process. Lenders assess various factors before approving a loan, and one of the most crucial elements they consider is the applicant’s CIBIL score. It is a three-digit numeric summary of an individual’s credit history, which plays a significant role in determining their creditworthiness. It ranges from 300 to 900 with 300 being a poor credit score and 900 being an excellent credit rating.
In this blog, we will explore effective strategies to increase your CIBIL score, helping you secure better education loans and realize your educational aspirations.
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Importance of a CIBIL Score
To embark on your journey of enhancing your CIBIL score, it’s essential to comprehend its significance. A CIBIL Score provides them with insights into your financial discipline, previous credit behaviour, and repayment track record.
A good CIBIL score is crucial as it reflects your creditworthiness to potential lenders. This builds trust in the lender and increases the applicant’s chances of getting a higher education loan amount at lower interest rates. A minimum score of above 650 is needed to avail of education loans. Other benefits of maintaining a good credit score include-
- Quicker approval of loans
- More negotiation authority
- Easy approval for rented/ leased properties
- Exciting credit card offers
Also Read: Read out our blog to know if you can get an education loan to study abroad without a CIBIL Score.
How to Increase Your CIBIL Score?
These are some of the ways you can increase your CIBIL score and maintain good credit for your credit cards. This includes setting reminders for payments, ensuring that you maintain older credit cards to lengthen your credit history, and avoiding taking too much debt at the same time.
Review and Rectify Your Credit Report
The first step in how to increase CIBIL score is to review your credit report thoroughly. Obtain a copy of your credit report from credit bureaus like CIBIL and carefully analyze it for any errors or discrepancies.
Common mistakes might include incorrect personal information, erroneous credit accounts, or inaccurate payment details. If you spot any inaccuracies, promptly contact the credit bureau to rectify them.
A clean and accurate credit report lays the foundation for a healthy CIBIL score.
Maintain a Consistent Payment History
One of the most crucial factors in how to increase your CIBIL score is your payment history. Lenders want to ensure that borrowers have a track record of timely repayments.
Missing or delaying payments can significantly impact your CIBIL score. Make sure to pay all your bills, loan instalments, and credit card dues on time.
Set up reminders or automate payments to avoid overlooking due dates. Consistently meeting your financial obligations will demonstrate your creditworthiness and improve your CIBIL score over time.
Reduce the Credit Utilization Ratio
The credit utilization ratio refers to the proportion of the available credit that you utilize. It is advisable to maintain a credit utilization ratio of around 30% or lower. It is an important step in the process on how to increase the CIBIL score.
Higher utilization suggests a heavy reliance on credit and may negatively affect your CIBIL score. To decrease your credit utilization ratio, consider paying off outstanding balances, limiting new credit card applications, and avoiding unnecessary debt.
By keeping your credit utilization in check, you send a positive signal to lenders, which can enhance your CIBIL score.
Build a Diverse Credit Portfolio
Having a diverse mix of credit accounts can positively impact your CIBIL score. A healthy credit portfolio may consist of a combination of credit cards, loans (such as personal loans or car loans), and long-standing credit history.
Lenders value individuals who have demonstrated responsible credit management across various types of credit. However, it is essential to exercise caution and not open multiple credit accounts simultaneously, as it may appear risky to lenders.
Relevant Read: Having a low credit score can make it challenging to obtain an education loan. Check out our blog on availing education loans with low CIBIL scores.
FAQs on Increasing CIBIL Score for Better Education Loans
A good CIBIL score is crucial for obtaining better education loans because it reflects your creditworthiness to the lenders.
Lenders, such as banks and financial institutions, use your CIBIL score to assess your creditworthiness and determine the risk associated with lending you money.
A higher CIBIL score indicates a lower credit risk, making you more likely to qualify for education loans with favourable terms, including lower interest rates, higher loan amounts, and more flexible repayment options.
The following are the effective ways to increase your CIBIL score for better education loans:
1. Pay your bills and EMIs on time
2. Maintain a low credit utilization ratio
3. Limit credit applications
4. Regularly review your credit report
The time required to improve your CIBIL score depends on various factors, including your current credit history and the actions you take to enhance it. Generally, significant improvements in your CIBIL score can take several months to a year or more.
A minimum score of above 650 is needed to avail of education loans.
There are many ways to increase your CIBIL score and set it to 900. You can go this by setting reminders for payments, ensuring that you maintain older credit cards to lengthen your credit history, and avoiding taking too much debt at the same time.
This was all about increasing your CIBIL Score for better education. A good CIBIL score is an invaluable asset when it comes to securing education loans for pursuing higher studies. By understanding the significance of a CIBIL score and implementing effective strategies, you can increase your chances of obtaining favourable education loan terms.
Start by reviewing and rectifying your credit report, maintaining a consistent payment history, reducing credit utilization, and building a diverse credit portfolio.
Remember, improving your CIBIL score takes time and consistent financial discipline, so be patient and stay committed to achieving your educational goals. With a healthy CIBIL score, you’ll be one step closer to turning your dreams into reality.
To know more about international scholarships, the loan application process, the best international bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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