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  • 12 Smart Tips to Improve your CIBIL Score

    Your CIBIL score or credit score is an important factor in determining whether you will be approved for a loan or not. CIBIL scores are generated based on your credit history which includes past credit taken and payment patterns in relation to them. A high score represents strong creditworthiness while a low score indicates low creditworthiness. Low scores will brand you a risky borrower and lenders will be hesitant to approve your loan application.

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  • What is a Good Credit Score?

    A CIBIL score ranges from 300-900, 300 being the lowest or bad cibil score and 900 being the highest. Your CIBIL score should be closer to 900 to get the best deals on interest rates for loans. A CIBIL score of 750 and above (750-900) is considered as ideal by majority of lenders like banks and non-banking finance companies (NBFCs).

    CIBIL score range What does it mean for your credit health?
    • Poor CIBIL score
    • Irregular repayment behaviour
    • Payment defaults
    • High credit exposure
    • High risk of turning a defaulter
    • Fair CIBIL score
    • Late payment of credit card bills/EMIs
    • Multiple credit inquiries
    • Good CIBIL score
    • Responsible repayment behaviour
    • Long credit history
    • Eligible to avail loan and credit card
    • Might have to pay higher interest rate
    • Low risk of turning a defaulter
    • Excellent CIBIL score
    • No defaulted payments
    • Timely payment of bills
    • No unpaid dues
    • Responsible credit handling
    • Cheaper interest rates
    • High negotiation power
    • Clean credit report

    How to Increase CIBIL Score from 600 to 750

    How to Improve your CIBIL Score

    When it comes to improving your CIBIL score, certain steps can make a significant difference. If you find yourself in a situation where your credit score is in trouble and you're considering applying for a new loan or credit card, follow these measures to enhance your score. By assuming your score is not ideal, the following actions can help you improve it. Take these steps to increase your CIBIL score and boost your chances of securing credit in the future.

    1. Check Your Credit Report

      Checking your Credit Reports regularly is a good idea because it will tell you two things that are absolutely critical to your credit score. The first will be the loan or credit card where the defaults or delayed payments exists that have brought down your score. The second thing it will tell you is the information that is recorded in the credit report. This helps in fixing the credit score because if you notice that there is negative information, in the form of defaults or delays in payments, mentioned on the report you can always approach the bank and CIBIL to get the situation corrected.

    2. Make Corrections to Errors

      You should dispute all errors immediately by visiting the official website, www.CIBIL.com Once you review your CIBIL report, you can determine the transaction that you disagree with or identify the error. You have to act on the disputes within 30 days and rectify the same.

    3. Note Your Credit Utilization Ratio

      Make sure that you do not use your credit card for all transactions. Try and keep your credit utilization ratio at 30% or less. When you do this, you will see a positive impact on your CIBIL score.

    4. Don’t keep applying for credit if rejected

      If you have applied for a loan or a credit card and your application has been rejected, the information will be recorded in your credit report. If you go and apply to another bank immediately then they will see your low score and the previous rejection and may reject your application. The best thing to do in such cases is to not apply again and wait for the score to improve.

    5. Keep the frequency of applications low

      One more reason why you should avoid applying for loans and credit cards too many times is that every time you apply for credit, the bank will ask CIBIL for your credit report and the inquiry will be recorded in the report. The enquiry by a bank can also cause the score to come down after each request for your report. This means that you suffer two disadvantages, the first being that you display a credit hungry behaviour and the second that your score comes down even if you have every intention and capability of paying back the loan/card on time.

    6. Pay your loans

      If there are loans which you have been delaying the payments of then you should make it your priority to start becoming prompt with the payment. If you are struggling with the current EMI that you have to pay then you can approach your bank to help you restructure the debt to make it easier to pay.

    7. Pay your credit cards on time

      When it comes to credit cards, the best thing to do is to not come too close to the limit of your credit cards. You should also make sure that you are not paying back only the minimum amount due on your cards, you need to pay back the entire amount or at least a sizable amount.

    8. Don’t settle loans and credit cards

      Many times people opt to settle a credit card or loan. What this means is that they approach the bank and ask for a deal that will allow them to close the debt for an amount that is lower than the actual amount due. While banks do, at times, entertain such requests, the settlement does reflect on the credit report and will have a negative effect on the score or a bank's willingness to offer fresh credit.

    9. Keep the borrowing to a minimum

      If you are applying for too many loans or are always near the limit of your credit card then your score is likely to come down since such activities display a credit hungry behaviour. The best thing to do is not to take a loan until unless absolutely necessary and make sure you don’t come close to your credit limits on the cards.

    10. Get a mixed bag of credit

      When it comes to loans there are two types of loans, secured and unsecured. If you take too many unsecured loans, banks tend to see it as a negative and might be inclined towards declining your loans. What you can do to is to take both unsecured loans like personal loans and secured loans likes car or home loans. P.S Credit cards also counts as unsecured credit.

    11. Watch out for joint applicants

      This is actually a situation where you could suffer even if you are not at fault. In this scenario, if you are the joint applicant for a loan someone else has taken, and they have defaulted on payments then you too will lose out in your credit score as it will reflect in your report as well. The best way to avoid this is to ensure that the loans and cards are being paid for on time.

      While it is true that a bad credit score can be damaging towards your future credit requirements, the situation is not completely beyond repair. The only thing you need to keep in mind is that it takes at least a few months for the scores to increase so you need to strap in for a bit of a wait before your scores start showing any improvement.

    12. Opt for Different Types of Credit

      Credit, if used carefully, can be beneficial because a person who has never had any type of credit has a lower CIBIL score, making it more difficult for them to receive loans. You can improve your credit history and increase CIBIL score by taking up few loans that may include a mix of secured and personal loans, as well as long- and short-term loans. Taking and timely repaying these loans will improve your credit score tremendously.

    Why Your Credit Score is Important

    Making money in this world is not hard, provided you have one key ingredient – Money. We live in times where we need money to make money, and we often spend precious moments of our lives thinking how to make this money. With banks and lending agencies opening up in every town and city, one might think that getting money will become easier, but this might not always be the case. Given the risk involved in lending, almost all financial organisations rely on certain criteria to gauge the repayment capacity of an individual. A credit score is perhaps the single biggest determinant when it comes to you availing a loan, which makes it critical for us to maintain our scores.

    Not only does a good score improve our chances of getting a loan/credit, but also helps us get a better interest rate (if played smart). While we give ourselves a makeover before approaching a lending organisation, paying attention to our score and giving it a makeover is just as important.

    Reason for Low CIBIL Score

    There are many reasons for a low CIBIL score. A borrower’s score can reduce because of his/her own errors and due to errors made by banks. Generally, mistakes made by banks include wrong information sent about a borrower to CIBIL and failure to update records among others.

    The main factor that affect the CIBIL score of a person is his/her own behaviour. The way borrowers deal with their finances can increase or decrease their scores. Mostly scores fall because of past behavior of the borrowers. Some of the common errors that borrowers make are:

    1. Outstanding Credit Card Balance - Some borrowers do not pay their total credit card bills every month and only pay the minimum amount due, which leaves them with an outstanding balance on their cards. What they do not realise is that this can reduce their credit score.
    2. Too Many Loans/Credit Cards - If a borrower applies for too many loans or credit cards, then every time a bank checks his/her credit report or score for processing the loan or credit card application it is counted as a hard enquiry. Too many hard enquiries can result in reduction of the score.
    3. High credit usage - If a borrower uses over 30% of his/her credit limit, then it negatively affects his/her score as it shows his/her dependency on credit is high.
    4. Delay in repayments - If a borrower delays in making his/her EMI payments, then it will be noted in his/her CIBIL report, which will reduce his/her credit score. Repayments are one of the important factors that is considered while calculating the credit score.

    Your Credit Card's Impact on your Credit Score

    A Credit Card can affect your Credit Score. Read this and use it wisely to positively impact your Credit Score.Paying only the minimum due, maxing out your credit limit, skipping payment due to a dispute and multiple rejected applications affect your Credit Score negatively.

    • Minimum Payment only Paying your bill regularly is a good thing, but paying only the minimum due is not. It casts doubts about your financial stability.
    • Maxing out your Credit Limit It's ideal not to use more than 60% of your credit limit. If you max out your credit, it's taken as a sign that you rely too much on credit.
    • Skipping Payment due to a Dispute If there's a dispute regarding some charges, don't skip paying the bill. It spells double trouble! Once the dispute is settled, the Credit Card issuer will reverse the disputed amount to your account.
    • Rejected Applications If your Credit Card application gets rejected for whatever reason, especially more than once, it will damage your Credit Score. So, make sure you provide the correct information to avoid rejection.

    Maintain your CIBIL Score like a Pro

    Doing all things right and still facing problems with keeping your CIBIL score, wondering what you can do more? There are several factors that affect your CIBIL score, not just bad credit behaviour in terms of payments and credit limits etc. Credit choices and their related areas can also affect your score. Some reasons are listed below:

    Credit Utilization - When you use the option of credit you should always keep in mind the Credit Utilization Ratio. This ratio is a comparison of the amount of credit you have used to the amount credit you have balance. This ratio amounts to 30% of your actual score. So let’s take an example of Mr. Pandey, who has 5 credit cards, with a total of 10 lakhs of credit limit on all of them, and he decided to close 3 of the 5 cards since he actively used only 2 cards. After she followed the procedure to close the 3 under-utilized cards, his credit limit fell from 10 lakhs to 2.5 lakhs. Mr. Pandey made most of his spending on credit cards and his monthly expenditure would amount to 2 lakhs on his 2 active credit cards, due to his under-utilization of the other 3 cards his credit score drops significantly.

    Loan Enquiries - If you want to buy a new car or get a loan to buy your dream home, you would like to check with few banks before you make your decision. Making multiple enquiries can raise a red flag against your name and in turn affecting your score drastically. For every enquiry you make with a financial institution, you enquiry gets recorded, and affects your score making it difficult for the bank to decide to provide you with the credit. Every enquiry brings down your CIBIL score. Let’s take the example of Mr. Pandey who wants to buy a villa in the suburbs of his city, he contacts 5 different banks for a loan of 80 lakhs, to ensure he is getting the best deal. Each of these enquiries have been recorded in CIBIL. With each record of enquiry Mr. Pandey is now eligible only for 65 lakhs, despite having a good repayment history.

    Repayments - Confused? How can repayments lead to a lower CIBIL score? Well, if you suddenly pay off your credit cards bills with a huge amount of money, it can affect your score. It can make your financial records look unstable and in turn could lead to a lower score. Whereas repayment on time in an effective manner will have a positive influence to your CIBIL score. Let’s again take the example of Mr. Pandey, whose uncle expired and in his will left him with 30 lakhs, since he has received such a huge sum, Mr. Pandey decides to pay off his 2 lakh credit card bill with the hopes of increasing his credit score for his good repayment before time, but when the bank receives this payment, they are suspicious of the transaction and notes the same, thereby decreasing the score rather than increasing it.

    CIBIL Score Update Time

    Credit reporting agencies usually update the report once each month. To check the same, you would need to wait and monitor your CIBIL report.

    If you filed a complaint with CIBIL about a mistake on your report, you might have to wait three months (90 days) for the complaint to be resolved before your CIBIL credit score is updated.

    These Two Things Hurt Your Credit Score the Most

    One of the most useful features of a credit card is the convenience of paying as well as getting the security. Thanks to these two factors, we have been witnessing a massive growth of credit cards.However, even though credit cards come with the convenience of buy now pay later, you have to make sure to be particular the repayments. A bad repayment history takes a toll on your credit score in a big way. Let’s understand how is your credit score calculated:

      • 35% - Payment History

      • 30% - Credit Utilisation

      • 15% - Age of Credit History

      • 10% - Type of Credit

      • 10% - Credit Inquiries

    All the aforementioned factors affect your credit score but the payment history and credit utilisation hamper your credit score the most. Let us now understand how credit cards impact these two factors.

    • Payment History
    • The chances of missing out on credit card payment are usually high and therefore you should be extra careful and remember the due dates. If you are not able to keep up with the payment due dates, it is better to come up with a simple foolproof way to avoid delay. You can either give standing instructions to your bank to pay off the bill from your savings account on a particular date. If you miss the due date or pay only the minimum due, your balance will accumulate interest. Any subsequent purchases on your credit card will also accumulate interest from the date of purchase. You also lose out on your interest-free period. Late payment of non-payment of bills hampers your credit score and brings it down.

    • Credit Utilisation
    • You should first learn how credit utilisation is calculated. Majority people are not aware that the higher your credit utilisation ratio, the larger effect it has on your credit score. As per experts, you should use only 20-30% of your credit limit. If you constantly spend a high percentage of your credit limit, say 60-80%, your credit utilisation ratio takes a hit. It’s important for you to keep the ratio low as it enhances your credit score. One way to tackle high credit utilisation ratios is to use multiple cards. As you already know that the 30% of your credit score comprises your credit utilisation ratio, you should be extra careful while using your credit card and always keep an eye on the credit limit.

    It must be noted that improving your credit score take time and patience and it cannot happen overnight. You have to follow certain discipline and work towards your financial goals to achieve the desired credit score.

    Who has access to your Credit Reports?

    Although not many people can access your credit report, a few individuals and institutions who legitimately requires it may have access to it. If a company has a genuine business requirement with you, it is safe to assume that they have access to your credit report and score. Here’s a list of some of the institutions and individuals that have access to your credit report.

    Banks – Quite naturally, banks can gain access to your Credit Report to gauge your credit worthiness. You don’t necessarily have to have a credit card for banks to have access to it. Your credit worthiness may be examined if you’re applying for a loan or even opting for an overdraft facility as this is considered to be a line of credit as well.

    Creditors – Anyone willing to loan you money will have to determine your credit worthiness before they put their faith in you. Credit card issuers and mortgage lenders are amongst a few that fall in this category. Determining your credit worthiness helps the creditor gauge if you’re capable of repaying the loan and helps the creditor determine the terms and conditions of the same. Generally, the better your credit score, the more likely you are to get a loan approved and attain favourable terms when it comes to repayment and interest rates.

    Insurance Companies – Statistically, it shows that individuals with poor credit score are more likely to file a claim. Insurance companies often measure your credit worthiness to determine how much they need to charge you for a new policy.

    Employers – Several employers now use credit reports to judge an employer’s honesty and integrity when it comes to finance. It can also be used to assess the risk of bribery pertaining to an employee as people with a lot of debt are more susceptible to bribery. In some cases, the reports can be a decisive factor when it comes to promotions and demotions.

    Government Agencies – Government agencies who have a legitimate requirement to pull up your credit score may do so. In the event that you’re applying for government benefits, court order, conducting business with the government, or any such instance, the government may pull out a report to understand your financial standing.

    FAQs on How to Improve Cibil Score Immediately

    1. What is the most important way to improve a credit score?

      Improving credit score depends on multiple factors and three most important among all are keeping the debt utilization ration below 30%; reviewing credit reports on a daily basis; and clearing debts in full on time.

    2. Can my credit score increase by 50 points in a month?

      Yes, you can increase your credit score up to 50 points which may even go up to 100 points in some cases.

    3. How long does it take to improve your credit score? >

      It takes considerable time to improve the credit score. Improving credit score depends upon the financial activities of the individual and hence, improving trend in your personal finance can help improving credit score.

    4. What is a good credit score to buy a house?

      If you have a collateral to offer against the loan, then you need to have a score of at least 620 or above. For a score of 750 and above customers can avail themselves of home loans at an affordable interest rate and in some cases, the interest rates go much lower than the existing market rates.

    5. What should you not do when trying to improve your credit score?

      Things you should avoid while you are trying to build a good credit score are keeping payment due or paying late; taking too much credit; canceling old or existing credit accounts; and using only one credit card.

    6. What can damage your credit score?

      Factors that can damage your credit score are making late payments; having high debt to credit ration; applying multiple credit at once; closing the credit account; and stopping activities related to credit for an extended period.

    7. What is the biggest factor affecting your credit score?

      The biggest factor that affects your credit score is payment history. history of on-time payments is best for your credit score, while missing out on payment can affect your scores. Foreclosure, tax lien and bankruptcy can also impact your credit score negatively.

    8. How does credit score affect loan?

      Higher credit score increases the chance to qualify for a loan more easily. Lender allows low mortgage interest rates and fees and enable users to avail themselves of reduced payment due to a high credit score.

    9. Does paying interest affect credit score?

      No, paying interest for loan or on credit cards does not impact your credit score directly. But in the current economic situation of the country, the rising interest rates may impact the credit score indirectly.

    10. Do late payments and high utilization of credit limits have a negative effect on your score?
    11. If you have missed payments on any of your loans over the years, your credit score would be negatively affected. A higher utilization pattern equals to more repayments and, therefore, negatively affect your score.

    12. How do more number of personal (unsecured) loans affect your score?

      More number of personal (unsecured) loans would also affect the score in a negative way since such loans have a high rate of interest compared to car or home loans and, therefore, more likely to result in defaults.

    13. What if you are ‘credit hungry?'

      If you are in urgent need of moolah and applied for credit from several lenders, it will have a negative impact on your score since lenders will then be wary to issue a fresh loan while evaluating your creditworthiness.

    14. How can I improve my credit score?
      • Timely payment of EMIs results in a clean credit history
      • Make full payments on your credit card instead of the minimum payment. If all else fails, try to make the minimum payment.
      • A credit card debt is known as revolving credit which helps build a good credit score faster (provided payments are made on a regular basis) compared to a loan.
      • If your utilization of credit limit has been low, it will have a positive effect on your score.
      • Prompt repayments help boost your score.
      • Reviewing your credit history regularly helps you gauge your financial health.
    15. Can my CIBIL score be improved?

      A CIBIL score is a representation of your entire borrowing history. It’s a representation of a trend, which means that if you’d defaulted on a loan in the past, merely paying off a few credit card bills on time won’t raise the score drastically. You’ll need to thoroughly involve yourself in a routine of honouring payments on time, every time, taking more secured loans as compared to unsecured loans and never missing a credit card payment. The score will improve gradually, as you keep honouring your debts.

    TransUnion CIBIL is one of the leading credit information companies in India. The company maintains one of the largest collections of consumer credit information in the world. CIBIL Score plays a key role in the lives of consumers. Banks and other lenders check the CIBIL Score of the applicants before approving their loan or credit card application. Consumers can visit the official website of CIBIL to check their CIBIL Score and Report. CHECK YOUR CIBIL SCORE now.

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