How to Improve CIBIL Score in India: 10 Actionable Points

In today’s financial landscape, having a good CIBIL score is essential, especially in India, where a credit score can make or break your chances of securing loans, credit cards, or even a good job. But what exactly is a CIBIL score, and why is it crucial to maintain a healthy one?

More importantly, how to improve CIBIL score in India if yours is not up to the mark? This article will cover the basics, importance, and practical steps to improve your CIBIL score and maintain it.

What is a CIBIL Score?

A CIBIL score is a three-digit credit score, ranging from 300 to 900, calculated by TransUnion CIBIL, one of the leading credit bureaus in India. This score reflects your credit history, including your ability to repay loans, credit card usage, and overall financial discipline. A higher score indicates that you are a responsible borrower, making you more likely to get loans and credit approvals.

Why is it Important to Improve Your CIBIL Score?

1. Loan Approvals: Banks and financial institutions rely heavily on CIBIL scores when deciding to approve or reject loan applications. Higher scores (750 or above) make you a preferred customer.
2. Lower Interest Rates: Borrowers with higher credit scores often get loans at lower interest rates, saving significant money over time.
3. Higher Credit Limits: A good CIBIL score often translates to higher credit limits on your credit cards, allowing more financial flexibility.
4. Employment Opportunities: Many employers in India, especially in the financial sector, consider credit scores when hiring for roles that require financial trust.

Clearly, a strong CIBIL score is a gateway to financial benefits and a safety net for your future. Now, let’s explore how to improve CIBIL score in India if your current score needs a boost.

10 ways to Improve Your CIBIL Score in India

1. Check Your CIBIL Score Regularly

Start by checking your CIBIL score regularly. This can be done through the official CIBIL website. Reviewing your score will help you understand where you stand and identify errors or discrepancies in your credit report. Checking your score does not negatively impact it, so make it a habit.

2. Correct Any Errors in Your Credit Report

Errors in your credit report can lower your CIBIL score. Common errors may include incorrect personal information, wrong credit balance, or even loans and credit accounts you did not open. Dispute these errors by contacting CIBIL via their dispute resolution page and provide the necessary documents for correction.

3. Pay Your Bills on Time

Timely payments are crucial for a good CIBIL score. Ensure you pay your EMIs, credit card dues, and utility bills on or before the due date every month. Even one late payment can negatively impact your score. Setting reminders or automating payments can help you stay consistent with on-time payments.

4. Reduce Your Credit Utilization Ratio

The credit utilization ratio is the percentage of available credit that you are currently using. Ideally, you should use less than 30% of your total credit limit. For instance, if your credit card limit is ₹1,00,000, try to keep your monthly usage under ₹30,000.

If you constantly use close to your limit, it can negatively impact your score. Try requesting a credit limit increase from your bank or reducing your spending to maintain a low utilization ratio.

5. Avoid Multiple Loan or Credit Card Applications

When you apply for multiple loans or credit cards simultaneously, lenders see you as “credit-hungry,” which can lower your score. Each application creates a “hard inquiry” on your credit report, which can hurt your CIBIL score. Therefore, apply for credit only when necessary and avoid frequent applications.

6. Keep Old Credit Accounts Open

Closing old credit accounts may seem like a good idea, but it can shorten your credit history, which is a key factor in your score. Longer credit histories with timely payments show lenders that you are a responsible borrower. So, if you don’t have a specific reason to close an old account, keep it open and use it occasionally.

7. Diversify Your Credit Portfolio

A balanced credit mix of secured loans (like home or auto loans) and unsecured loans (like personal loans and credit cards) can improve your CIBIL score. Lenders view a diverse credit portfolio positively as it demonstrates your ability to handle different types of credit responsibly.

8. Don’t Become a Loan Guarantor Without Consideration

If you become a guarantor for someone else’s loan, it can affect your CIBIL score if they fail to make timely repayments. Ensure you fully understand the responsibilities before becoming a guarantor, as it could impact your creditworthiness.

9. Repay Your Loans Strategically

If you have multiple loans, prioritize repaying those with higher interest rates or shorter terms. Repaying high-interest loans first can relieve financial pressure, and completing loan repayments positively impacts your CIBIL score. Avoid defaulting or settling loans with banks, as “settled” status is less favorable than “closed” in your credit history.

10. Monitor Joint Accounts Regularly

If you have a joint account or a loan with someone else, monitor it closely. Any missed payment from the co-owner will impact your CIBIL score as well. Make sure that both parties stay financially disciplined to avoid potential impacts on your score.

Read Also: How to Improve CIBIL Score Using Credit Card: 7 Essential Tips