How to Improve CIBIL Score – 11 Smart Ways
If you are planning to apply for a loan, your lender is highly likely to check your CIBIL score before deciding whether it would offer you a loan or not. CIBIL is a 3-digital score between 300 and 900 symbolising an individual’s creditworthiness. If your CIBIL score is above 750, you could get the best available loan offers provided you meet other eligibility criteria. But if your score is below 650, your loan offer is likely to involve a higher interest rate. In fact, a poor credit score could translate to loan application rejection too! But how to increase your CIBIL score? Read on as we’ve discussed 11 smart ways to do it!
CIBIL Score Table
| CIBIL Score Range | Rating |
| 300 – 500 | Poor |
| 550 – 650 | Needs attention |
| 650 – 699 | Satisfactory |
| 700 – 749 | Good |
| 750 – 900 | Excellent |
How to Increase CIBIL Score?
You must keep these points in mind to increase your CIBIL score and enjoy the benefits of a high CIBIL score.
1. Raise CIBIL Disputes
If you find any inaccurate data in your CIBIL records, you need to raise it to the CIBIL (Credit Information Bureau Limited) for correction. This will help rectify your CIBIL history and increase your scores.
2. Pay Credit Card Bills on Time
Borrowers must remember to repay their outstanding credit card debts on time. Missing due dates or late payments will directly bring down their credit scores. It will also reflect their organised approach towards financial management. One can set up reminders or enable auto-pay options to avoid missing credit payments.
3. Limit Credit Utilisation
According to historical data, limiting one’s credit utilisation to 30% helps to keep up one’s credit score. On the other hand, having a high credit utilisation of 40% or more can harm a user’s CIBIL score.
Using it less will prevent a cardholder from optimally increasing his/her credit score. Credit cardholders can set their card limit in a way that prevents credit utilisation from increasing above 30%.
4. Don’t Check Your Credit Card Scores Often
It is a common misconception that checking your credit report regularly can bring down your CIBIL scores. However, this is only sometimes the case. A borrower checking his/her credit reports online is a soft inquiry. These credit inquiries do not affect a person’s CIBIL score.
In contrast, when credit card companies take up inquiry requests from lenders to check borrowers’ credit reports, it is called a hard credit inquiry. Hard inquiries usually happen when card owners apply for a new loan.
Frequent hard inquiries can lower your CIBIL score. Therefore, credit card owners are suggested to take loans infrequently to avoid multiple hard inquiries. In this way, they can boost their CIBIL score.
5. Keep a Check on Your CIBIL Report for Multiple Applications
If you are repaying more than one debt, it is mandatory to keep an eye on your CIBIL record after every repayment. This will help you monitor any discrepancies in your credit report if any arise.
Regularly monitoring your CIBIL score will allow you to report any error in time and prevent your score from falling.
6. Do Not Close Old Credit Cards
Another common misconception is that credit cards no longer in use will automatically be deactivated. However, this is not the case. Old credit cards with no outstanding loans are a boon in disguise. Owning them can bring an impressive boost to your CIBIL score.
Therefore, cardholders must hold on to these cards instead of closing them to improve their credit rating.
7. Don’t Keep Applying for Cards or Loans if Rejected
Loan applications can be rejected when borrowers do not possess enough money in their accounts. Low CIBIL scores can also lead to loan rejection.
If you keep applying for new loans, it will negatively impact your credit scores. Therefore, you should wait and increase your account balance or clear outstanding loans for a certain period. After this, you can resume applying for a new loan if you meet the eligibility criteria.
8. Opt for Different Types of Credits
Borrowers can diversify their credit portfolios to achieve better CIBIL scores. To do so, they need to have the right amount of secured and unsecured loans with both long and short tenures.
With multiple debt obligations, borrowers should ensure they have enough funds to repay the long-tenure loans after repaying the shorter ones. To maintain such a balance, borrowers must calculate their existing liabilities before applying for new loans.
9. Opt for Longer Tenure When You Take a Loan
Opting for longer-tenure loans helps you avoid missing due dates or defaulting on loans during a financial crunch. In addition, due to their flexible tenure, long-term loans can help you manage your finances and pay conveniently.
Thus, choosing a loan with longer tenure can help you increase your CIBIL score.
10. Pay Your Loan EMIs on Time
This is the most crucial rule for borrowers to increase their CIBIL score. Timely payments of EMI will let the credit score rise. Conversely, late or missing repayments can dramatically decrease these scores.
Therefore, borrowers’ sole responsibility is to maintain a healthy repayment habit.
11. Watch Out for Joint Application
If you are opting for a joint loan application, you must watch out for your partner’s spending habits. If a co-applicant has a reckless or spendthrift nature, it can lead to a fall in CIBIL scores for both.
Similarly, if you missed one repayment, the CIBIL score will decrease for both of you. Therefore, it is necessary to choose a co-applicant wisely before going for a joint application.
Reasons for a Low CIBIL Score
Many reasons could affect your CIBIL score:
1. High Usage of Credit Limit
If you tend to use more than 50% of the credit limit set by your lender, your credit score will plummet. The credit limit is set considering your income and it sets a limit on your expenditure. Using more than 50% of your credit limit could signal your financial irresponsibility, resulting in a low CIBIL score.
2. Outstanding Credit Card Balance
Unpaid debts like telephone or electricity bills can also hamper your credit score. These outstanding credits can reflect indiscipline in one’s finances. This can further lower an individual’s credit score. To avoid such a scenario, borrowers must repay all or most of their outstanding loans before opting for a new one. In this way, they can improve their CIBIL scores and prevent themselves from being overburdened with debt.
3. Late Payment
The most common reason for a low CIBIL score is the late payment of loan dues. Delayed payment, even by a day, could lower your credit score. It signals the lenders that you are unable to pay your dues on time. As a result, your credit score can take a hit.
4. Multiple Loan Applications
If you have applied for multiple loans in a short period of time, it can lower your credit score. While your need for money could have a genuine reason, taking small loans from multiple lenders makes the lenders doubtful whether you will be able to repay so many loans on time.
Also Read
What is Considered as a Good Credit Score?
A CIBIL score of 700 and above is considered a good score while a score above 800 is considered excellent. A good CIBIL score could help you bag the desired loan amount at low interest rates. A CIBIL score of 800 and above is likely to work in your favour during loan processing and you’re also likely to enjoy the lowest available interest rate.
Importance of Having a Good CIBIL Score
A good CIBIL or credit score is considered to be above 750. This shows lenders that you are trustworthy and are capable of repaying the loan on time. A good CIBIL score also increases the possibility of getting loan approvals quickly and at a lower interest rate. Even to get a personal loan, the minimum CIBIL score is between 720-750.
Having a good credit score is always recommended because a good score gives you many benefits, such as:
- Easy approval of your loan application
- Wide choice of loan deals
- Access to a higher quantum of loan
- Possibility of availing of low-interest rates
- Scope of negotiating the interest rate with the lender to fix the most reasonable rate
- No restricting terms and conditions on availing of the loan
- Instant loan sanctions
Impact of Credit Card on Credit Score
1. Not Paying Your Credit Card Dues
Missing your credit card dues could not just lead to additional interest charges and late payment penalties but also adversely impact your credit score.
2. Paying Only the Minimum Amount Due
Paying only the minimum amount, which is a small fraction of the total outstanding dues, could massively increase your credit utlisation, in turn, reducing your credit score.
3. Maxing Out
Exhausting your entire credit limit would show that you’re credit desperate – something that could also lower your credit score.
4. Applying for Multiple Credit Cards in a Quick Succession
This would translate to multiple hard checks on your credit profile, in turn, lowering your credit score. Multiple card application rejections could lead to bigger credit score drops.
How to Maintain Your Cibil Score?
1. Repay All Your Loan Dues in Full on Time
Being disciplined about all your loan repayments and credit card dues is the best and most effective way to build, maintain and improve your CIBIL score over time. Contrarily, missing your loan EMI payments or defaulting or getting your loan “settled” could be highly detrimental to your CIBIL score
2. Avoid Multiple Loan Applications
When you’re planning to apply for a loan or a credit card, you should compare your options carefully and apply only for the loan or card variant that best meets your requirements. Applying for multiple loans or credit cards, especially in a quick succession, could hamper your credit score.
3. Maintain a Low Credit Utilisation Ratio
While using revolving credit facilities like a credit card, try to keep your total monthly usage to less than 30% of your card’s credit limit.
4. Monitor Your Credit Report Regularly
Checking your credit report at least once a month could help you spot any errors, fraudulent transactions or mismatches in time, which, if kept unchecked, could severely impact your credit score.
When is CIBIL Score Updated? – Cibil Score Update Time
Lenders and credit card companies usually submit data to CIBIL every 30-45 days, following which CIBIL updates the same information in the credit report of the concerned individual. CIBIL cannot modify any information in the database unless confirmed by a credit institution, according to Credit Information Companies (Regulation) Act, 2005.
Final Word
Now that you know how to increase CIBIL score, try to maintain a high credit score so you get the loans approved quickly. Keep a tab on your CIBIL score so that you can take corrective measures when the score reduces. Calculate your score using cibil score calculator and try to check once a month.
Did you know? Timely repaying your personal loan could also improve your credit score. So, if you are looking for urgent cash, you may want to consider an instant Navi Cash Loan of up to ₹20 lakh starting from 9.9% p.a. Just download the Navi app, enter your PAN and Aadhaar number, check loan eligibility, complete KYC verification and get the approved loan amount in your bank account in just a few minutes!
FAQ
There are different websites and mobile applications, like the Navi app, which allow you to check your CIBIL score free of cost. However, if you want a full credit report, the report would be prepared and issued by authorized credit bureaus and that would cost money.
Lenders allow loans if you have a credit score of 750 and above. Check the eligibility parameters of the lender to find out the minimum CIBIL score for the personal loan required.
The minimum CIBIL score to get a personal loan is between 720-750.
No, try and maintain your credit cards even if you don’t use them. This is because each card allows you a credit limit and the higher the credit limit the lower would be your credit utilisation ratio which would, in turn, give you a high credit score. So, maintain your cards for maintaining your CIBIL score.
Credit hunger refers to an individual’s nature to keep applying for more loans and credit irrespective of his/her credit score. Unlike credit savvy individuals, credit hungry individuals do not take into consideration their income source, existing loan accounts or debt to income ratio before applying for a new loan. This behaviour adversely affects their CIBIL score and reduces their chances of being eligible for future loans.
To increase your CIBIL score from 600 to 750+, you need to build a strong credit history, manage loan payments efficiently, not close your old credit accounts, pay EMIs on time and monitor your credit report. If you have a good CIBIL score like 750 or above, getting a loan would be a breeze.
No, 600 is considered an average credit score where you’re unlikely to get a loan at the best available repayment terms. A score below 600 could even lead to a loan application rejection.
It might be difficult to improve your credit score in 30 days as credit institutions usually take 30-45 days to update CIBIL regarding any information. Even new disputes raised by you could take up to 45 days to be rectified while those pertaining to older issues could take longer. However, repaying all your loan dues in full on time could improve your CIBIL score in a few years.
Your CIBIL score is unlikely to increase on a month-on-month basis. However, dispute rectification, timely repayments and higher loan quantum could increase your credit score over time.
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