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How to Improve Your CIBIL Score Immediately (10 Smart Ways)

Published on Apr 24, 2020Updated on May 21, 2024

How to Improve Your CIBIL Score Immediately (10 Smart Ways)

CIBIL is one of the four credit bureaus in India that generates reports based on your credit score. Your CIBIL score reflects your credit history. It is used by lending institutions to evaluate your creditworthiness before approving loans and other credit-based financial products. Most lenders have started classifying customers based on their credit score and are offering risk-based pricing on certain loans. The lower the risk, the lower the rate of interest and vice versa.

What is CIBIL Score?

A CIBIL score is a 3-digit numeric summary of your CIBIL report. The latter is a detailed record of your payment history, credit utilization, outstanding debts, and more credit-related information. The CIBIL score shows your creditworthiness to the lenders and is an important indicator of how likely you are to repay a loan.

Since it is a credit score generated by TransUnion CIBIL, it is commonly referred to as a CIBIL score. The scores generated by other credit bureaus (Experian, Equifax, and CRIF High Mark) are typically referred to as a credit score. While the credit scores generated by all 4 bureaus are valid, lending institutions tend to give preference to the CIBIL score.

What is considered a Good Credit Score?

A specific score considered to be “good” can vary depending on the rating model used or the lender’s criteria. The CIBIL score range in India is from 300 to 900. In general, a score in the range of 650 to 749 is considered to be “good”, while scores of 750 and above are thought to be “excellent”. A credit score of 750 and above will increase your chances of getting a loan with low interest rates, provided you meet other eligibility criteria.

How is Your CIBIL Score Calculated?

CIBIL scores are calculated taking into consideration several factors that include your payment history, length of payment history, applications for credit, the debt amount, credit mix, etc. Different weightage is awarded to each of these factors. Ensuring a good score is an ongoing activity.

Why Is Your Credit Score Important?

Your credit score is important because it is a numerical representation of your creditworthiness, which is the likelihood that you will pay back your debts on time. It is a tool that lenders, such as banks, credit card companies, and other financial institutions, use to assess the level of risk they would be taking by lending you money or extending credit. A good credit score is one that ranges from 750 to 900.

CIBIL Score Range

CIBIL scores range from 300 to a maximum of 900. A score between 300 to 549 is considered poor whereas 550 to 700 is considered as an average score. Being at the top of your credit score can help you obtain loans easily, but the opposite is also true.

CIBIL Score Range Rating

 300 - 500

Poor

550 - 650

Average

650 - 750

Good

750 - 900

Excellent

Use the CIBIL score checker today to know what your credit score is.

The minimum CIBIL score for a personal loan is 700 and above. Anything below 700 could be a cause for concern. However, all is not lost. While your credit score cannot change overnight, major and minor modifications in your financial habits can help in making a significant difference.

Steps to Improve Your Credit Scores

Here are some key steps that, with consistent practice, will help you improve your credit score:

  • Payment history is one of the most important factors that influence credit scores. Be sure to pay all credit card dues, loan payments, and utility bills on time.
  • A high credit balance against your credit limit can lower your score. It is recommended to keep your credit card balance below 30% of the credit limit on each card.
  • Limit new credit applications, especially within a short period. Each new application initiates a hard inquiry on your credit report, which can lower your credit score temporarily.
  • Monitor your credit report regularly for any errors or inaccuracies that might be hurting your score. If found, raise a dispute with the credit bureau to get them corrected. nal to lenders that you may be at a higher risk for defaulting on loans or credit accounts.

Reason for Low CIBIL Score

A low CIBIL score can affect your ability to obtain credit, including loans and credit cards. There are several factors that can lead to a low CIBIL score, including:

  • High credit utilization: If you use a large percentage of your available credit, it can indicate that you may be relying too much on credit, which can negatively impact your score. Keep your credit utilization ratio low, typically less than 30% of your total limit.
  • Late payments: Late payments on loans or credit cards can lower your score, as it suggests that you may be having difficulty managing your finances or prioritizing your debts.
  • Too many loans or credit accounts: Having too many loans or credit accounts can be a sign of financial strain and credit hungry behavior. This can make lenders hesitant to extend credit to you.
  • Defaulting on utility bills or other payments: Utility bills, such as electricity, water, or phone bills, can also impact your CIBIL score. If you regularly miss payments or default on bills, it can signal to lenders that you may be at a higher risk for defaulting on loans or credit accounts.

How to Increase your CIBIL Score Immediately?

1. Repay Credit Card Dues on Time

Paying outstanding credit bills can help in improving your credit score. Getting into the cycle of paying only the basic amount due as it appears on the credit card statement might help in escaping late payment charges. This minimum amount due is approximately 5% of the billing amount in that cycle. However, this leads to interest and taxes being added to the bill in the next cycle and leads to a mountain of debt.

Paying dues on time not only prevents interest from mounting, but it also helps in improving your credit score in the long run.

2. Limit Credit Utilization

Using less than 30% of your credit card limit can help in preventing damage to your credit score. On the other hand, not using your credit card at all can adversely affect your credit score. It is advisable to pay off your credit card dues well in advance. Using more than 30% on your credit card is considered to be high credit utilization, it is advisable to opt for a higher credit limit which can help in increasing your credit score fast. Also, it is advisable to limit your applications for loans. Applying for multiple loans can also adversely affect your score.

3. New Credit Cards

Be prudent while applying for credit cards. While credit cards are helpful while applying for loans, having an excessive number of credit cards and making high-value purchases might prove to be counterproductive. While applying for a credit card, it is a good idea to check your credit eligibility and apply to banks where the chances of your loan application getting approved are higher. This is because not only spending excessive amounts on your credit card but applying for credit cards from several banks can adversely affect your credit score.

Ensure that you maintain a reasonable gap between making applications to prevent lenders from believing that you are chasing credit. Applying for credit cards when you can repay it helps in adding points and helps in increasing your credit score.

4. Keep a Check on Your Credit Report

A study by the Federal Trade Commission in 2012 found that approximately 20 percent of customers had an error in their credit report. A repeat study conducted in 2015 found out that customers who reported an unsolved error still believed that there was an error in the report. Keep a check on your credit report from time to time for inconsistencies and errors. Credit bureaus are legally bound to offer borrowers one free credit report a year.

Online marketplaces have also simplified the process of monitoring credit history. The report could contain errors like incorrect information, delay in updating the report or a delay in updating important details in your report. These errors can adversely affect your credit score. Errors, if any, can be reported and rectified instantly.

5. Opt For Different Types of Credit

Credit, if obtained wisely, is helpful since a person who has never obtained any form of credit will generally have a lower CIBIL score which can make it difficult for them to obtain loans. Hence, it is advisable to include different types of credit in your portfolio that include a mix of personal and secured loans, long as well as short term loans to improve your credit history.

This step can help in improving your chances of availing a higher loan and a lower rate of interest when you decide to apply for a loan. Know what is a CIBIL score today.

6. Increase your Credit Limits

By increasing your credit limit, it will instantly lower your credit utilization ratio and boost your credit score.

Over utilizing the credit limit available to you beyond a certain limit will result in the credit scoring models categorizing you as a high-risk borrower. As you are utilizing the full credit limit (or beyond a certain limit), your credit utilization ratio increases significantly, thus increasing the risks of default. Although the risks distantly apply on you, your credit score gets negatively impacted.

Hence, it is wiser to increase your credit limit before any additional spending. By doing this, you get the opportunity to manage your credit wisely and can keep your credit utilization low, thus increasing/maintaining your credit score.

7. Keep Old Debt on Your Report

Your credit score is a reflection of your past credit behavior and based on that, the lender approves the loan application.

Therefore, keeping the records of your old good loan account in your credit report is a good practice for your credit score. After all, a debt that is repaid following the agreed terms within the stipulated time frame increases your creditworthiness and has a positive impact on your future loan application.

Also, one of the other ways to improve your credit score is to keep your good accounts active where you’ve got a solid repayment history for as long as possible. This is the most common tactic used by business enterprises. They keep their credit account active for as long as possible, to boost their credit score.

8. Never Give a Hint of Risk

The credit scoring models are designed to pick up the early signs of stress and risks in the borrower’s profile.

For example, missing on credit card payments, suddenly paying less than the total due amount or revolving credit is the first sign of stress in the borrower’s credit profile. Other changes such as, taking cash advances or using cards at meeting business expenses are signs of stretched cash flow.

9. Don’t Apply for Multiple New Credit Lines

Opening a new credit line increases your credit limit, but every application for a new credit line creates a hard inquiry on your credit report. Hard inquiry is a detailed analysis of your credit profile to assess how much risk you possess as a borrower.

As hard inquiry is reflected on your credit report for two years, multiple hard inquiries in a short span of time can negatively impact your credit score. Hard inquiry resulting in rejection of loan application is an extremely negative event.

10. Be Patient and Persistent to Your Approach

A credit score doesn’t improve overnight and it requires consistent effort to repair the credit report and improve it.

Therefore, you need to be patient and continue to monitor your credit report, your different credit lines, spending pattern and ensure timely payment of a debt. Over time, it will help to boost your credit score and improve your creditworthiness.

Increasing your CIBIL score is an uphill task but can be achieved with the help of planning and discipline.

How does a CIBIL score Affect Eligibility for Loans?

A CIBIL score plays a major role in determining your eligibility for a loan. A high CIBIL score, generally 750 and above, allows lenders to see you as a low-risk borrower with a good track record of loan repayment. This significantly increases your chances of fast loan approval as long as you meet all the eligibility requirements. Applicants with higher credit scores can also get more favourable loan terms such as low-interest rates, higher loan amounts, and more flexible repayment periods.

Please note that the loan terms will also depend on other factors such as age, monthly income, employment status and lender’s policy at the time of application.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

FAQs

How often should you check your credit score?

You should check your credit score online every few months, especially if you are planning to apply for any type of loan in the future. Doing so will help you catch any drop in the score early and take steps to correct it before you apply for the loan. At the very least, you should check your credit score once a year.

How can you quickly improve your credit score?

Improving credit scores takes consistent time and effort, there is no way to instantly improve it. Here are some strategies that, when practiced consistently, will help you increase credit score over time and help maintain it:

  • Paying credit card dues, EMIs, and utility bills on time.
  • Keeping credit card utilization below 30% of the available limit on each card.
  • Avoiding multiple new applications for credit within a short period of time.
  • Keeping old credit accounts open to demonstrate a longer history of responsible credit management.
  • Regularly monitoring your credit report for any errors and promptly disputing them with the relevant credit bureau.

How long does improving your credit score take?

By consistently practicing responsible credit behavior, it could take around 4 to 12 months for your credit score to show improvement.

Who has access to your Credit Reports?

Your credit reports can be accessed by authorized entities such as:

  • Financial institutions or your existing lenders
  • Potential lenders
  • Insurance companies
  • Potential employers (only with your permission)

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