How to improve your CIBIL score with a personal loan? Here are 4 ways

livemint.com:

When you want to improve your credit score, also commonly known as CIBIL score, there are a number of ways to do it. For instance, evaluating the credit score, correcting mistakes in it, paying credit card bills on time, maintaining a good credit mix and keeping credit utilisation low – collectively help raise the CIBIL score.

Meanwhile, procuring a personal loan, too, helps maintain a good credit score as it adheres to similar principles of improving the credit score overall. 

Make regular payments: As with any credit product, making timely payments on your personal loan is vital. So, one should ensure that they pay their EMIs on time every month. Defaulting or payments can have an adverse impact on your CIBIL score.

Low credit utilisation ratio: Your credit utilisation ratio, which is the amount of credit you're using compared to your total available credit, plays a key role in your CIBIL score. By taking a personal loan and not utilising all of your available credit, you can improve this ratio, which can positively impact your CIBIL score.

Diversify your credit mix: Your credit mix, or the types of credit accounts you have, also influences your CIBIL score. Adding a personal loan to your credit mix can diversify it, thus potentially improving your score over a period of time.

Avoid multiple loan applications: Each time you apply for a loan, it creates a hard inquiry on your credit report, which can lower your CIBIL score for the time being. Avoid applying for multiple loans within a short span of time as this can signal to lenders that you are not financially sound.

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However, it is vital to remember that raising your