How to improve CIBIL Score

The first step in improving your credit score is to understand more about it. Let’s look at what a good credit score is and how you can improve it.

What is CIBIL Score?

Your CIBIL Score or credit score is a three-digit number that measures your credit health. This score ranges from 300 to 900. The higher your score the better are your chances of getting a loan or credit card. Lenders check your credit score before they approve your loan application. A poor score could result in your loan application being rejected.

What is a good CIBIL Score?

A score of 700 and above is a good CIBIL score. Credit scores of 750+ are ideal scores to get a loan approved. Individuals with high credit scores are eligible of all kinds of loans and credit cards. In addition, you also get better borrowing terms like better interest rates. The below table gives you an understanding of what the different CIBIL Scores mean.

Your credit score is not permanent. It changes over time with healthy credit practices. For example, Anita was looking to apply for a personal loan. But her application was rejected due to her poor credit score as she had missed a few EMIs. However, she decided to take action to improve her credit score. She followed the below mentioned actions to improve her score:

• Made timely credit card and loan repayments
• Increased her credit limit
• Kept her credit utilisation to a minimum
• Closed all her unused loan accounts
• Rectified errors in her Credit Health Report

By doing this she was able to build her credit score gradually over time.

Check your CIBIL Score

Let’s do a deep dive on the factors that can improve your CIBIL Score

1. Repayment History
   Your repayment history is a crucial factor impacting your score. You must ensure that you follow a healthy practice of repaying your loans regularly and on time. Delayed or missed payments can have a negative impact on your score.
2. Credit utilisation
   Avoid maxing out on your credit card limit. This behaviour indicates that you are a risky borrower and can negatively impact your score.
3. Healthy credit mix
   Having a healthy mixture of credit is a good reflection on your Credit Health Report and has a positive impact on your credit score. Use a mix of credit like credit cards, as well as secured (home Loan, gold loan) and unsecured loans (personal loan) and repay them on time to maintain a good CIBIL Score.
4. Avoiding multiple credit enquiries
   Making multiple credit enquiries or applications for loans to different lenders in a short period indicates irresponsible credit behaviour. Every time you a make an enquiry for a loan, the lender gets your credit information from a credit rating bureau. Over time, having too many enquiries can negatively impact your credit score.
5. Length of credit history
   Your credit history gets built from the time you first apply for a loan or credit card. It is nothing but the duration since when you have been borrowing. Having a lengthy credit history helps with an understanding of your credit behaviour like timely payments, missed or late EMIs. This in turn can impact your approval for new loans or credit cards.

Credit scores are very important and indicates how credit worthy you are as a borrower.

To monitor your credit factors, sign-up for our Credit Pass