11 Smart Ways to Increase Your CIBIL Score Immediately

Personal Loans

Did your loan application get rejected due to poor CIBIL score? Your CIBIL score shows your creditworthiness based on which a lender decides on your loan eligibility. But don’t worry, there are still ways to improve your CIBIL or credit score.

This post tells you the importance of having a good credit score and shows you 11 smart ways on how to increase your CIBIL or credit score. Read on!

What is CIBIL Score?

Credit score or CIBIL score is a three-digit number that serves as a summary of your creditworthiness and ranges from 300 to 900. A score is allotted to consumers based on their repayment history, credit utilisation ratio and frequency of credit applications, among others. 

The score helps the lender understand your credibility as a borrower. To avail of a loan, you need a credit score of 650+. However, any score above 750 is considered excellent and could help you fetch better deals on loans, liek lower interest rates.

Follow the table below to understand where you stand as a credible borrower:

CIBIL Score Table

What Happens if You Don’t Have a Good CIBIL Score?

Having a poor credit score puts your credibility as a borrower at stake. Lenders usually reject credit card/loan applications for customers with below average credit score. This is because your CIBIL score is primarily based on your repayment history.

This means that if you have defaulted on loan repayments in the past or don’t have any repayment history (you don’t have a credit card or have taken a loan), your CIBIL score would be affected. These are reasons enough for lenders to raise eyebrows before approving your loan application.

Even if you get a loan with a poor credit score, the interest rate charged could be substantially higher.

So, always try to maintain a healthy CIBIL score to get easy access to credit in times of emergency.

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Also Read: What Is The Best CIBIL Score Range To Get Loans, And How To Improve It?

How to Increase Your CIBIL Score?

Even if your CIBIL score is low, you can still improve it by making a few changes to your financial habits.

We have curated 11 smart ways to improve your CIBIL score. Hope the list gives you a fair idea on the necessary steps you should take to improve your credit score.

1. Repay Your Loans On Time

The first and the most important way to maintain a high CIBIL score is to pay off your credit dues on time, every time. If you have a loan in your name, pay the EMIs within the due date without any default. 

Similarly, if you own and use credit cards, pay off their bills, fully, within the due date without fail. If your repayment history is clean, you would be able to improve your credit CIBIL score.

2. Keep Your Credit Utilisation Ratio Low

Credit utilisation means the credit that you have used against the credit allowed. You are allowed a credit limit by the lender when you avail a credit card or take a loan. 

Against the allowed limit, the amount of credit that you actually use determines your credit utilisation ratio. Here’s how the calculation of the credit utilisation ratio is done:

Credit Utilisation Ratio = (Credit used / Credit allowed) * 100

A high ratio is not good at all for your credit score because it depicts a higher dependency on credit. So, try and keep your credit utilisation ratio low so that your CIBIL score improves.

3. Have A Healthy Mix Of Credit Products In Your Portfolio

Have a mix of unsecured loans and secured loans. Personal loans and credit card debt are unsecured loans. On the other hand, car loans, home loans, education loans, etc. are secured loans.

If you favour either type of loan, your credit portfolio would be concentrated and your credit mix would be affected. So, try and opt for a mix of secured and unsecured loans in your portfolio so that you can have a healthy credit mix.

4. Do Not Close Old Credit Cards

Old credit cards reflect on your credit history. Keeping a record of your loan or credit behaviour is important. Your old credit card has a high chance of having a good credit score, which will help you get loans easily. 

5. Pay Your Utility Bills On Time

Besides credit dues, payment of your utility bills also impacts your credit score.

Defaulting on your utility payments has a negative impact on your credit score and so you should pay off your utility bills on time to increase your CIBIL score.

6. Do Not Make Multiple Loan Applications

Every time you apply for a loan, a hard enquiry is made into your credit score by the lender. Too many hard enquiries, within a short period of time, negatively impact your credit score.

So, if you want a loan, check the different options and make one application. For subsequent loans, wait for some time before applying so that too many enquiries into your credit report are not done.

7. Have A Credit History

To have a credit score you need a credit history. So, have one or the other form of credit in your name so that you have a credit history based on which the credit score can be calculated.

8. Check Your Co-applicant’s CIBIL Score before Applying for a Loan

Joint loan applications could go either way depending on your or your co-applicant’s credit score. If both of you have a poor credit score, your loan application could get rejected.

So, for applying for joint loans like home loan, check your co-applicant credit history to avoid unpleasant surprises.

9. Check Your Credit Score Regularly

You should check your credit score regularly so that you can apply for CIBIL correction if needed. When you check your score, it is called a soft inquiry and it does not affect your credit score. 

So, keeping track of your CIBIL score is important so that you can improve it if needed.

10. Get Errors Rectified

Usually, your credit report is prepared with utmost care but in some cases, there might be wrongful entries in the report which have a negative impact on your score. 

So, when you keep a check on your credit report, you can weed out errors. If there is an error, you can get it rectified so that your credit score is not hampered.

11. Don’t Keep Your Lenders In The Dark

Life is unpredictable and even the best of us can fall on hard times or have emergency situations to deal with. If you’ve got EMI dates looming and anticipate difficulty in making a payment, set up a meeting with your lender.

Explain your situation and restate your commitment. Lenders may offer you leeway or an interim solution that doesn’t impact your CIBIL score.

How is CIBIL Score Calculated?

Your credit score is calculated by authorised credit bureaus like TransUnion CIBIL, Experian, Equifax, etc. Moreover, there are online websites and mobile apps, where you can enter your details and your credit score will be displayed. Your credit score is calculated using the following factors:

• Your credit history
• The history of repayment of your past and present loans and credit cards
• The types of credit you have availed to date
• Your credit usage
• Enquiries on your credit score

Also Read: CIBIL Score Calculator And How To Check CIBIL Score Online

Good CIBIL Score & Its Importance

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. These benefits include the following –

• 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

Effects of Loan and Loan Settlement on CIBIL Score

Banks and financial institutions report the credit information of borrowers to the credit reporting agencies. The primary goal of the credit bureaus is to keep a track of the financial transactions that businesses and individuals engage in and give them credit ratings accordingly. 

In this regard, applying for too many loans aggressively can affect your credit score negatively for a short period of time. 

Additionally, one-time loan settlements or settlement of outstanding amounts also downgrades one’s credit score. When banks propose a loan settlement to a borrower, it generally highlights the borrower’s inability to repay the loan. 

Credit bureaus record the credit settlements which adversely affect the credit score. 

Reasons for Low CIBIL Score

Many reasons could affect your CIBIL score:

• 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. 
• 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. 
• 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.

Can You Get a Loan with Low CIBIL Score?

Getting a loan with a low CIBIL score is difficult. Even if you manage to get a loan with a poor credit score, most probably there would be several terms and conditions attached to your loan. This happens mostly with personal loan customers.
That’s because personal loans are unsecured loans, meaning you don’t have to pledge collateral or guarantor. Hence, lenders are extra careful before giving loans to customers with low CIBIL score.
For secured loans, like home loans, you could still get a loan, primarily because you are required to pledge collateral (your home in case of home loan). However, the interest rates could be on the higher side.

Final Word

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 credit score online and check it every six months. If your CIBIL score is low, use the 11 ways to improve your CIBIL score and get your loan approved.

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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article. 

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