Consider a CIBIL score as a reflection of your creditworthiness that helps lenders assess whether you're a reliable borrower. A low CIBIL score makes it difficult for one to find credit opportunities, be it a personal loan, credit card, etc. On the other hand, someone with a good credit score welcomes ample credit opportunities.
So if you’re someone who needs to improve their CIBIL score, in this blog, we’ll walk you through the basics of what a CIBIL score is, and how you can also improve your CIBIL score to get the maximum out of your credit facility.
CIBIL stands for Credit Information Bureau India Limited, also known as TransUnion CIBIL. They generate a three-digit numeric score known as the CIBIL score by collecting information about an individual's credit history from banks, NBFCs, and other lending partners to determine their creditworthiness.
A good CIBIL score holds supreme value and works in favour in the hour of securing a loan. It gives access to favourable loan conditions, reduced interest rates, and expanded credit opportunities. But, on the flip side, if your score is not appealing, it can be challenging to secure a loan with all the above goodness.
Is there any way out there on ‘how to improve CIBIL score’? Yes. By adopting responsible financial practices and applying strategic credit management strategies, anyone can improve their CIBIL score, optimise their credit profile, and reap the advantages of a robust credit standing. But before that, know what a good credit score is.
If you are new to understanding the score card, know this — a score card ranges from 300 to 900, with 300 considered poor, indicating a high credit risk, and a good CIBIL score range lies anywhere above 650 and beyond, showing better creditworthiness.
The table below shows the CIBIL Score range against its ratings for a clearer overview.
| CIBIL Score Range | Rating |
|---|---|
| 300 - 500 | Poor |
| 550 - 650 | Average |
| 650 - 750 | Good |
| 750 - 900 | Excellent |
But here’s the catch. Moving from 600 to beyond takes a lot of consistency and smart work. If you are ready to do what it takes to increase your CIBIL and work your way up, continue reading the next section.
With a few mindful actions, you can significantly increase your credit score. Here are the tips below:
First things first, you should carefully check your credit report once you have finished reviewing the credit score. If you find errors in your report, you can immediately visit the official website of CIBIL and rectify the mistakes in transactions you disagree with within the 30-day timeframe. This way you can save your credit score from going down in flames.
Imagine applying for a loan while still having unpaid debt. Keep yourself in the lender's shoes and think about how they can trust you with outstanding debt. If you want to reap the advantages of a good CIBIL score and qualify for new loans, ensure you clear all your unresolved payments on time. This will build trust and help you gradually improve your score.
Consider paying all your EMIs on time. Delaying payments affects your credit score and appears on your credit report. If you have an ‘auto-debit’ facility, ensure you have enough funds in your bank account to support your commitment to repay within the timeline.
Relying solely on your credit card for expenses signals to lenders that you depend on credit too much rather than your primary source of income. This will make lenders hesitant to give credit. To be a responsible and trustworthy borrower, keep your credit usage low. This can improve your CIBIL score and help you get credit more easily.
It’s possible that, even if you’re making your payments on time, the other party may fail to update CIBIL with your latest payment information. This negligence can negatively impact your credit score and hinder your efforts to improve it. To prevent such setbacks, build a habit of checking your credit score and addressing any discrepancies promptly.
A balanced credit mix is key to building and maintaining a good credit score. Lenders look for a diverse credit portfolio as it shows your ability to handle different types of loans/borrowings. However, as mentioned above, timely repayments are essential to avoid falling scores.
If, in any given situation, you are not able to pay your dues, the bank may suggest settling the loan by making a small one-time payment. Repay the outstanding dues to lenders as soon as possible to close the loan repayment on time. In addition, plan your loan procurement and repayment well in advance to avoid situations that affect your credit score significantly.
Your loan application is recorded in your credit report. If your loan is rejected, it’s already noted. Immediately applying for another loan will lower your score and increase the chances of rejection. To work around this, the best thing one can do is focus on improving the credit score for the time being and wait for the right time before applying again.
You might not be at fault, but the situation can have adverse consequences and majorly affect your scores. Before being a joint applicant or a guarantor for someone, be certain about their financial situation and repayment capabilities. In case of the borrower’s default, your scores will be at risk, and you can lose out on your well-maintained CIBIL score.
Even if you no longer use your older credit cards, it’s wise to keep them as long as you can manage your bills on time and in full. Holding onto these cards can positively impact your credit score over time, as the length of the credit history plays a key role in maintaining a strong score. Hence, consider keeping them active instead of deactivating them to support your financial future.
Availing credit seems easy until a not-so-approved CIBIL score holds you back. Improving your CIBIL score, especially from 600 and beyond, takes strategic planning and financial discipline. You may not see significant changes in just a few months, but by following the steps above and maintaining healthy credit habits, you can ensure a good credit score for the long term.
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