How to Increase Your CIBIL Credit Score

If there is one thing that all financial experts unanimously recommend, it is to have a high credit score as this can open multiple doors for you financially. Not only will you avail credit easily, you can also get them at lower interest rates and other advantageous terms.

Your credit score plays a significant role in determining whether or not you will be approved for a loan. It is calculated using your credit history, which includes previous credit taken and payment patterns associated with it.

Low credit scores mark you as a high-risk borrower, and lenders will be hesitant to approve your loan application.

Today, all Banks and NBFCs mandatorily verify the CIBIL score of borrowers. But even if you have a low credit score, the good news is that there are ways to improve the same.

Let us first understand what a ‘good CIBIL score’ is and then find out you can improve your score easily.

What is a ‘Good’ Credit Score?

TransUnion CIBIL, one of India's largest and most popular credit bureaus, assigns credit scores ranging from 300 to 900 to individuals and businesses and the higher the score, the better it is.

The closer your score is to 900, the more likely it is that your loan will be approved. A score of 300 to 549 is considered poor, while a score of 550 to 700 is considered fair. A score above 750 is considered to be excellent.

CIBIL Score Range and Credit Health

Let us understand what a certain score range means for your creditworthiness.

Credit Score Range

Creditworthiness Indicator

300-549

  • Inadequate CIBIL score

  • Unusual repayment patterns

  • Payment failures

  • Credit risk is high

  • High risk of becoming a defaulter

550-649

  • A decent CIBIL score but needs improvement

  • Payment of credit card bills/EMIs after the due date

  • Several credit inquiries

650-749

  • Good CIBIL score

  • Responsible repayment practices and a lengthy credit history.

  • Eligible for a loan and a credit card

  • You may have to pay a higher interest rate

  • There is a low risk of becoming a defaulter

750-900

  • Exceptional CIBIL score

  • There have been no missed payments

  • No outstanding fees

  • Responsible credit management

  • Lower interest rates

  • High bargaining power

  • A good credit history

Steps to Improve CIBIL/Credit Score

If your score is low, here are some steps that you can take to help improve the same -

  • Examine Your Credit Report

Checking your credit reports on a regular basis is a good idea as you can find out about all the defaulted or delayed payments that have reduced your credit score.

Additionally, you can also correct mistakes if there are any by visiting the official website, www.cibil.com. You must act on the disputes within 30 days and make the necessary corrections.

  • Monitor Your Credit Utilisation Ratio

It is essential to maintain a credit utilisation ratio of 30% or less. You will see an improvement in your CIBIL score if you do this. Use your credit card judiciously and do not use it to withdraw cash or purchase items that you don’t need.

  • Do Not Reapply Immediately After Rejection of Credit Application

If you apply for a loan or a credit card and your application is denied, the information will appear on your credit report. While this will not directly affect your credit score, if you continue to apply, your score will get negatively impacted.

  • Do not apply for Credit Frequently

You should avoid applying for loans and credit cards too frequently. Each time you apply for credit, the bank will request your credit report from CIBIL, and the inquiry will be recorded in the report. If these inquiries are frequent, your credit score will be impacted as you will be seen as credit-hungry.

  • Make On-time Payments on Your Credit Cards

When it comes to credit cards, the best thing to do is to avoid exceeding the credit card's limit. You should also ensure that you are not only paying just the minimum amount due on your credit cards, but that you are paying the entire amount or at least a sizable amount.

  • Borrow the Minimum Amount

If you apply for too many loans or are constantly nearing the limit on your credit card, your score is likely to suffer because such activities demonstrate credit-hungry behaviour. 

The best thing to do is to avoid taking out loans unless absolutely necessary, and to avoid exceeding your credit card limits.

  • Set Payment Reminders

Your ability to repay debts can have a significant impact on your credit score. This is why you must exercise self-control when it comes to EMI payments.

Delays in EMI payments not only result in a penalty, but also decrease your credit score. So, make it a point to set EMI payment reminders so that you can complete them on time.

  • Utilize Types of Credit

If you haven't borrowed money in the past, you won't have a credit history, and your CIBIL score will be nil as a result. So, to build a strong credit score or improve your existing credit score, borrow a healthy mix of credit, both secured and unsecured.

In Conclusion

Given the inherent risk in lending, almost all financial institutions rely on specific criteria to assess an individual's repayment capacity. A credit score is perhaps the single most important determinant of your ability to obtain a loan, making it critical for us to maintain our scores.

If you haven't borrowed money in the past, you won't have a credit history, and your CIBIL score will be nil. Here are some tips you can follow to build the same.

Follow the steps given above to improve your credit history. However, iIt is important to note, however, that these steps will not result in an immediate improvement in your score. It will take 6 months to a year after you implement them for your credit score to improve.

In the meantime, you can also avail a personal loan to help you build your credit score. For the best option, visit the Money View website or download the app to apply.

How to Improve CIBIL Score - Related FAQs

What Can I Do To Improve My CIBIL Score?

Knowing how to quickly improve one's CIBIL score is always advantageous. We have outlined the steps in the section above, such as paying off debts on time, maintaining a healthy debt mix, and not taking out too many loans at once, which can help you improve your CIBIL score quickly.

Your credit score will suffer if you have missed payments on any of your loans over the years. A higher utilisation pattern equates to more repayments and, as a result, a lower credit score.

A greater number of personal (unsecured) loans would also have a negative impact on the score because such loans have a higher interest rate than car or home loans and are thus more likely to result in defaults.