In a highly competitive market like India, business plans must be implemented under a timeline to ensure the best possible outcome. While a lack of funds can present itself as a hurdle, the inability to acquire the required funds can become an additional challenge.
Not being able to obtain the necessary funds at the right time can disrupt business expansion plans, halt equipment upgrades, delay renovations, and in some cases, impact working expenses in a very significant way.
To avoid this, small business owners need to maintain their credit profile in order to access the required funds when the need arises. While there are many sources that can educate you on how to improve your CIBIL score, only a handful can tell you how to do it quickly.
This article will walk you through smart and seamless ways to quickly improve your credit score.
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What is a CIBIL/Credit Score
Before we dive into the question of how to improve CIBIL score, let’s understand what it is. A CIBIL/credit score is a three-digit numerical figure that determines your creditworthiness and assures the lender that you can pay back the loan amount they issue you.
A CIBIL/credit score is provided by a credit bureau authorized by the Reserve Bank of India and ranges from 300 (poor) to 900 (excellent). A credit score close to the 900 mark increases your chances of loan approval, but anything 700 is considered good by most lenders. It’s important to note that while your credit score matters, some lenders, especially NBFCs like Kinara Capital, consider multiple factors other than this number into consideration to gauge your creditworthiness.
How is the CIBIL score calculated?
As a mathematical algorithm applied to credit information, a credit score is calculated by authorized credit bureaus of the country. There are a total of four credit information bodies in India:
- TransUnion CIBIL
- CRIF Highmark
These organizations are licensed to acquire and supervise all financial records related to individuals and churn out detailed credit reports based on the data. These are the factors that impact the credit score of an individual:
- Credit utilization ratio (CUR): Credit usage is one of the significant factors that impact your credit score. A credit utilization ratio shows the total amount of loan you have used compared to the total assigned limit.
- Duration of credit: A long credit history positively impacts your credit score and shows a healthy track record of making timely payments.
- The number of accounts: Having a balance of secured and unsecured credit accounts is another factor that contributes to your credit score. It reflects as experience and increases the CIBIL score
- History of payment: This has a significant impact on the credit score. Regular payment of your instalments and credit card bills has a massive positive impact on your overall score. Conversely, defaulting on loan payments can bring down your score significantly.
How to improve CIBIL score?
While lower credit scores can make it hard for you to obtain a loan, there is always a scope to improve. Here is how to improve CIBIL score without waiting too much:
- Scan your credit report regularly: It is imperative to go through your credit report and scan it for any errors. Any form of discrepancy can be duly addressed by the credit agencies and rectified.
- Holding on to your old credit cards: A prolonged credit history can help you bring your credit score up. Just make sure you make the payments in full regularly.
- Longer loan tenure: A longer tenure translates to a lower EMI amount. This ensures that you clear your payments regularly and reflects positively on your CIBIL score
- Credit limit: Maintaining a good credit utilization ratio ensures an improvement to your credit score. Restrict yourself from using your entire allotted credit limit, and it will positively impact your CIBIL rating.
Build your Credit Score with Kinara Capital
With Kinara Capital, you can strengthen your credit score by acquiring a business loan on your terms. With over 400 payment gateway options, you can pay your loan EMI without ever missing the due date.
So, maintain your credit rating and commence building your profile as a successful entrepreneur.
- MSME Loan
- Business Financing
- Business Loan Eligibility
- Credit Score