If you have recently begun your business, you must know everything about the CIBIL score. It not only impacts your ability to take Loans but also affects your chances of securing funding. Learn how to increase your credit score with practical tips and insights to get you started.
What is a credit score?
A high credit score is the basic requirement for a Business Loan for a startup company. It is a numerical representation of your creditworthiness used by lenders to determine your eligibility for credit products like Loans and Credit Cards. Its calculation depends on your credit history, outstanding debts, payment history, credit utilisation, and other factors.
The most recognised credit score in India is the CIBIL credit score, which ranges from 300 to 900. The higher it is, the better your chances of getting approved for credit products and better interest rates.
Importance of good credit scores for new businesses
Acquiring a Business Loan for startup business becomes easier with a high credit score. You also qualify for lower interest rates on Credit Cards and Loans, which saves you money. If you have a high credit score, it helps you establish better relationships with vendors and suppliers. You can negotiate better payment terms with suppliers, improving your cash flow and helping in effective finance management.
Practical tips on building your credit score
1. Pay bills on time
You can improve your credit score range by setting up automatic payments, using bill reminders, consolidating your debt into one monthly payment, etc. This ensures you pay your bills on time.
2. Keep credit utilisation low
It is best to pay off Credit Card balances without accruing additional interest, track your credit limit, and request a higher credit limit from your card issuer. This keeps your credit utilisation ratio low, which improves your credit score.
3. Monitor your credit report
Another way to increase your credit score is to monitor your monthly reports, identify fraudulent activities, and review your credit report carefully each month. This provides a quick peek at your financial status and helps you identify potential slips and misses.
4. Maintain a good relationship with creditors
Another way to improve your credit score is by maintaining regular communication, paying bills on time, and keeping your creditors informed in case of any delay. It helps you stay organised while tracking your bills closely.
How to check credit scores?
If you are eager to check your CIBIL or credit score before applying for a Business Loan for a startup company, you can request a free online credit report from the major credit bureaus in India. Review it for accuracy and check whether the information entered is correct and up to date.
Conclusion
Boosting your CIBIL credit score is essential for any new business looking to establish a strong financial foundation. By following these tips, you can take the necessary steps to improve your creditworthiness and gain access to better financing options.
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