How to Improve CIBIL Score

As individuals seek financing for various purposes like business ventures, medical expenses, or home management, understanding how to enhance and maintain their CIBIL score becomes crucial. Know more about the effective ways to boost your CIBIL score and maintain a healthy credit report.

Here are ways that you can adopt to improve your CIBIL score:

• Pay your dues on time
  

• Diversify your credit portfolio
  

• Avoid settling your loans and/or credit cards

• Limit the frequency of loan applications
  

• Monitor your credit report
  

• Opt for a healthy credit mix
  

• Reduce credit risks
  

• Request higher credit limits
  

• Maintain old credit cards
  

• Limit credit inquiries
  

• Be consistent and patient

1. Pay Your Dues on Time

Ensure you pay your credit card dues and loan EMIs on time. Missing the deadline may indicate that you are not disciplined and lack the ability to manage your debts effectively. This can lead to heavy penalties and can negatively impact your creditworthiness, resulting in a low credit score. 

2. Diversify Your Credit Portfolio

Strive for a balanced mix of secured and unsecured debts. Relying on unsecured loans too much may raise concerns for lenders, potentially impacting your CIBIL score.

3. Avoid Settlements

Opting for settlements on loans or credit cards can harm your CIBIL score. While settling allows you to close debts for less than the actual amount, it leaves a lasting negative mark on your credit report, affecting future credit opportunities.

4. Limit Frequency of Loan Applications

Limit the frequency of loan applications to maintain a healthy CIBIL score. Multiple inquiries, especially in a short period, can label you as credit-hungry, potentially lowering your creditworthiness.

5. Monitor Your Credit Report

Regularly review your credit report for errors or inconsistencies. Promptly rectify any inaccuracies to ensure an accurate reflection of your credit history.

6. Opt for a Healthy Credit Mix

Aim for a mix of secured and unsecured loans to enhance your credit history. This diversity showcases your ability to manage various credit repayments, positively impacting your CIBIL score.

7. Reduce Credit Risks

Demonstrate financial stability by consistently making timely credit card payments and avoiding lower-than-due payments. This highlights responsibility and reduces the risk associated with your credit profile.

8. Request Higher Credit Limits

If needed, request a higher credit limit to maintain a healthy credit utilisation ratio. This responsible credit management can positively influence your CIBIL score.

9. Maintain Old Credit Cards

Keep your old credit cards active, even if not in use. This displays a positive credit history, contributing to a higher CIBIL score over time.

10. Limit Credit Inquiries

Minimise hard inquiries by avoiding frequent applications for new credit lines. Excessive inquiries in a short span can adversely affect your CIBIL score.

11. Patience and Consistency

Understand that improving your CIBIL score is a gradual process. Stay patient, be consistent in your efforts, and regularly monitor your financial actions and CIBIL score for disciplined financial management.

 

Now that you have understood how to increase your CIBIL score, let us look at some common factors that have a negative impact on your scores.

It can take 6 months to several years to improve your CIBIL score. However, the time required depends on your unique circumstances such as financial habits, the initial cause for the low score and your current CIBIL score. Therefore, it is crucial that you opt for a sustained and holistic approach to your credit score-rebuilding exercise.

 

While there is no fixed timeline for improving your CIBIL score, it’s important to remember that the lower your score is, the longer it will take you to increase your CIBIL score. Generally, a score of 750 and above is recommended to have a good chance of qualifying for loans. If your score is on the lower end and less than 600, then it will naturally take a while to increase.

 

Here is a table showing an estimated timeline for CIBIL score rebuilding with regard to the various financial circumstances:

A good CIBIL score is essential when it comes to managing your finances and accessing credit. Here are some key reasons why maintaining a high score is important:

Easier Loan Approvals

When you apply for a loan, whether it's for a home, car, or personal needs, lenders check your CIBIL score first. A good score indicates to lenders that you’re a reliable borrower, which increases your chances of getting your loan approved quickly and easily.

Better Interest Rates

A higher CIBIL score often means you qualify for lower interest rates on loans and credit cards. Lenders see you as less risky, so they’re more likely to offer favourable terms. This can save you a lot of money in interest payments over time.

Higher Loan Amounts

If you have a strong CIBIL score, lenders are more likely to offer you higher loan amounts. This can be especially useful when you’re making a big purchase like a house or planning for major expenses, such as education or medical needs.

Access to Premium Credit Cards

Many banks and financial institutions reserve their premium credit cards—those with better rewards, benefits, and cashback offers—for customers with high CIBIL scores. With a good score, you can enjoy these exclusive perks that may not be available to others.

Approval for Rental Agreements and Utility Services

Many landlords and utility service providers now check credit scores as part of their approval process. A high CIBIL score can make it easier to secure a rental agreement or get utilities like electricity and internet connection without any hassle.

 

Maintaining a good CIBIL score opens the door to many financial opportunities. It gives you more control over your borrowing and enables you to save money in the long run. Make sure to check your score regularly and practice healthy credit habits to keep it in a healthy range.