11 Smart Ways to improve your CIBIL Score
If you want a loan, your lender will probably check your CIBIL score first. CIBIL is a 3-digit score (between 300 and 900) that shows how good you are with credit. If your score is over 750, you can get the best loan deals if you meet other rules. But if it’s below 650, your loan might have a higher interest rate or even get rejected. Wondering how to boost your CIBIL score? We’ve got 11 easy ways for you!
| CIBIL Score Range | Rating |
| 300 – 500 | Poor |
| 550 – 650 | Needs attention |
| 650 – 699 | Satisfactory |
| 700 – 749 | Good |
| 750 – 900 | Excellent |
How to Improve CIBIL Score?
Here are some important things to remember if you want to boost your CIBIL score and enjoy the perks of having a high credit score:
1. Raise CIBIL Disputes
If you discover any incorrect information in your CIBIL records, it’s crucial to bring it to the attention of CIBIL (Credit Information Bureau Limited) for correction. Rectifying inaccuracies in your CIBIL history can positively impact and raise your credit scores.
2. Pay Credit Card Bills on Time
Borrowers should always remember to pay off their outstanding credit card debts promptly. Missing due dates or making late payments can directly decrease their credit scores. It also reflects their organised approach to financial management. Setting up reminders or enabling auto-pay options can be helpful in avoiding the risk of missing credit payments.
3. Limit Credit Utilisation
Based on historical data, it’s advisable to keep credit utilisation to a maximum of 30% to maintain a good credit score. Conversely, having a high credit utilisation of 40% or more can negatively impact a user’s CIBIL score.
By using less than the maximum limit, cardholders can avoid potential harm to their credit scores. It’s recommended to set the card limit in a way that prevents credit utilisation from exceeding the 30% threshold. This strategic approach helps in maximising the potential for increasing one’s credit score.
4. Don’t Check Your Credit Card Scores Often
There’s a common misconception that regularly checking your credit report can harm your CIBIL scores, but this is not entirely true. When a borrower checks their credit reports online, it’s considered a soft inquiry, and these inquiries do not impact a person’s CIBIL score.
On the other hand, when credit card companies respond to inquiry requests from lenders to review borrowers’ credit reports, it is termed as a hard credit inquiry. Hard inquiries typically occur when individuals apply for a new loan.
Frequent hard inquiries have the potential to lower your CIBIL score. Therefore, it’s advisable for credit card owners to apply for loans infrequently to avoid multiple hard inquiries. This approach can help in boosting their CIBIL score over time.
5. Keep a Check on Your CIBIL Report for Multiple Applications
When you’re repaying multiple debts, it’s crucial to regularly check your CIBIL record after each repayment. This practice helps you stay vigilant and catch any discrepancies that may arise in your credit report.
By consistently monitoring your CIBIL score, you can promptly report any errors, ensuring that they are addressed in a timely manner. This proactive approach not only safeguards your financial reputation but also prevents your credit score from experiencing a decline.
6. Do Not Close Old Credit Cards
There’s a widespread misconception that unused credit cards will be automatically deactivated, but this isn’t true. Old credit cards with no outstanding balances can be a hidden asset. Keeping them can significantly boost your CIBIL score.
It’s advisable for cardholders to retain these cards rather than closing them, as this can contribute to an improvement in their credit rating. So, holding on to inactive credit cards can be a strategic move to enhance your overall creditworthiness.
7. Don’t Keep Applying for Cards or Loans if Rejected
Loan applications may face rejection if borrowers lack sufficient funds in their accounts. Additionally, low CIBIL scores can contribute to loan rejection.
Continuously applying for new loans can have a detrimental effect on your credit scores. To improve your chances of approval, it’s advisable to wait, increase your account balance, and settle outstanding loans over a specific period. Once you’ve strengthened your financial position, you can resume applying for new loans, ensuring you meet the eligibility criteria for a higher likelihood of approval.
8. Opt for Different Types of Credits
Borrowers can enhance their CIBIL scores by diversifying their credit portfolios. This involves having an appropriate mix of secured and unsecured loans, as well as loans with both long and short tenures.
Managing multiple debt obligations requires careful planning. Borrowers should ensure they have adequate funds to repay long-tenure loans after settling the shorter ones. To maintain this balance, it’s crucial for borrowers to calculate their existing liabilities before considering new loan applications. This strategic approach can contribute to a well-rounded credit profile and, ultimately, better CIBIL scores.
9. Opt for Longer Tenure When You Take a Loan
Opting for longer-tenure loans offers several advantages, especially during financial challenges. The extended repayment period reduces the risk of missing due dates or defaulting on loans, providing greater flexibility.
The flexibility of longer-term loans allows for better financial management, making it more convenient for borrowers to meet their repayment obligations. This responsible repayment behaviour positively influences your creditworthiness and can contribute to an increase in your CIBIL score over time. Therefore, choosing a loan with a longer tenure can be a strategic move to enhance your credit profile.
10. Pay Your Loan EMIs on Time
When opting for a joint loan application, it’s crucial to be aware of your partner’s spending habits. If a co-applicant has a reckless or spendthrift nature, it can negatively impact the CIBIL scores for both individuals involved.
Moreover, any missed repayments will result in a decrease in the CIBIL scores for both applicants. Therefore, it is imperative to choose a co-applicant wisely before proceeding with a joint application. Selecting a responsible and financially prudent co-applicant is essential to maintain and safeguard both parties’ credit scores.
11. Watch Out for Joint Application
When opting for a joint loan application, it’s crucial to be aware of your partner’s spending habits. If a co-applicant has a reckless or spendthrift nature, it can negatively impact the CIBIL scores for both individuals involved.
Moreover, any missed repayments will result in a decrease in the CIBIL scores for both applicants. Therefore, it is imperative to choose a co-applicant wisely before proceeding with a joint application. Selecting a responsible and financially prudent co-applicant is essential to maintain and safeguard both parties’ credit scores.
4 Reasons for a Low CIBIL Score
1. High Usage of Credit Limit
If you exceed 50% of your assigned credit limit, your credit score may drop significantly. The credit limit, based on your income, imposes a cap on your spending. Surpassing the 50% threshold may indicate financial irresponsibility, leading to a diminished CIBIL score.
2. Outstanding Credit Card Balance
Unsettled obligations such as unpaid telephone or electricity bills have the potential to adversely impact your credit score. These lingering debts may signify a lack of financial discipline. Consequently, an individual’s credit score may decline further. To avert this situation, borrowers should prioritise settling all or a significant portion of their outstanding loans before considering new ones. This proactive approach enables them to enhance their CIBIL scores and avoid the pitfalls of becoming overwhelmed by accumulating debt.
3. Late Payment
The predominant cause of a diminished CIBIL score often stems from delayed loan payments. Even a slight delay, such as a one-day lapse, has the potential to reduce your credit score. This tardiness signals to lenders that you may face challenges in meeting your payment obligations promptly, leading to a negative impact on your creditworthiness.
4. Multiple Loan Applications
Applying for numerous loans within a brief timeframe has the potential to decrease your credit score. Although your need for funds may be legitimate, seeking small loans from multiple lenders raises doubts among the lenders about your ability to repay numerous loans punctually. This scepticism can contribute to a decline in your credit score.
What qualifies as a good credit score?
A CIBIL score of 700 and above is deemed good, and a score surpassing 800 is considered excellent. Possessing a good CIBIL score enhances your chances of securing the desired loan amount at favourable interest rates. A score of 800 and above not only works in your favour during loan processing but also increases the likelihood of obtaining the lowest available interest rates.
What is the significance of having a good CIBIL score?
What defines a good CIBIL or credit score, and why is it important? A credit score above 750 is considered good, indicating to lenders that you are reliable and capable of timely loan repayment. A favourable CIBIL score enhances the likelihood of quick loan approvals and secures lower interest rates. Even for personal loans, a minimum CIBIL score typically falls between 720-750.
Maintaining a good credit score is crucial due to various benefits, including:
- Easy approval of loan applications.
- Access to a broad range of loan deals.
- Eligibility for a higher loan amount.
- Potential to secure low-interest rates.
- Opportunities to negotiate interest rates with the lender for the most favourable terms.
- Absence of restrictive terms and conditions for loan approval.
- Expedited loan sanctions.
How does owning a credit card affect your credit score?
1. Not Paying Your Credit Card Dues
Missing credit card payments can result in more than just extra interest and late fees; it can also have a negative impact on your credit score.
2. Paying Only the Minimum Amount Due
Making only the minimum payment, a small fraction of the total outstanding dues, can significantly raise your credit utilisation, thereby decreasing your credit score.
3. Maxing Out
Utilising your entire credit limit indicates a sense of credit desperation, a factor that can potentially lower your credit score.
4. Applying for Multiple Credit Cards in a Quick Succession
This results in multiple hard inquiries on your credit profile, subsequently lowering your credit score. Experiencing rejections for multiple card applications may lead to more significant drops in your credit score.
What are the ways to maintain your CIBIL score?
Ensure timely and full repayment of all your loan dues.
Exercising discipline in meeting all loan repayments and settling credit card dues consistently stands out as the optimal and most impactful approach for building, maintaining, and enhancing your CIBIL score. Conversely, the repercussions of missing loan EMI payments, defaulting, or opting for loan settlement can be highly detrimental to your CIBIL score.
Steer clear of submitting multiple loan applications.
Before applying for a loan or credit card, it’s crucial to meticulously compare your options and choose the one that aligns best with your needs. Submitting applications for multiple loans or credit cards, particularly in rapid succession, has the potential to adversely affect your credit score.
Keep your credit utilisation ratio at a minimum.
When utilising revolving credit facilities such as a credit card, aim to maintain your total monthly usage at less than 30% of your card’s credit limit.
Regularly monitor your credit report for any changes or discrepancies.
Regularly checking your credit report, preferably on a monthly basis, can assist in promptly identifying errors, fraudulent transactions, or discrepancies. Left unaddressed, these issues could significantly impact your credit score.