How to Increase Cibil Score - 6 Ways to Improve Cibil Score

Nowadays, with online loan processing, people can borrow loans easily or depend on credit cards to achieve their financial goals and aspirations faster. Therefore, to avoid fraudulent activities, financial institutions and loan providers gauge the borrower’s repayment habits. The borrower’s financial history is easily reflected through the acquired CIBIL score. A good CIBIL score ranges from 400 to 900. Those falling in this slot get the benefit of low-interest rates while those with not-so-good credit scores can face difficulties in loan approval. Hence, it is advisable to pay your dues on time to build a good credit score.

A CIBIL score is a reflection of your credit history. CIBIL is one of the four credit agencies in India that generates reports based on your credit score. It is mandatory to verify the CIBIL score for all types of loans - home loans, personal loans, credit card loans, etc. Those with a low CIBIL score should know how to improve their CIBIL score gradually with the timely payment of EMIs, increasing the credit limit, and keeping track of the credit report.

Different Credit Score Ranges

CIBIL Score Range	Rating
300 – 500	Poor
550 – 650	Needs attention
650 – 699	Satisfactory
700 – 749	Good
750 – 900	Excellent

6 Ways to Improve Your CIBIL Score

Your CIBIL score proves to be vital in defining whether your loan application will be approved or not. For a personal loan, the CIBIL score should be on the higher side. In case your credit score is low, and you want to know how to improve your credit score, it can be modified and improved with some changes in financial habits:

1. Timely Repayment of Dues: Paying outstanding debts of credit cards or EMIs on time will increase your CIBIL score. Getting into the pattern of paying only the minimum dues will help in preventing delayed payments and extra charges. Therefore, repaying dues will prevent interest from mounting up and increasing your credit score in the long run.
    
2. Check your Credit Report: Keep an eye on your credit score for discrepancies and errors. The information recorded in the credit report decides the level of credit score. Sometimes the report could contain errors. If you notice any negative information mentioned in the credit report, approach the lenderand the CIBIL to get the report corrected.
    
3. Prioritize Old Debt: Repay your old debts before applying for new loans. The interest and number of loans will keep piling up that will directly affect the credit score.
    
4. Make Automated EMI Payments: Setting an auto-debit option for EMI deduction every month is a smart thing to do. There is no hassle of manually paying the EMIs as the amount will be automatically deducted on the set date. It will zero down the scope of missing the EMIs or causing any delays.
    
5. Maintain a Healthy Credit Mix: Plan your borrowings smartly with a mix of secured and unsecured loans that can be used for long and short tenure as per your budget and ability to repay. Avoid applying for multiple loans or keeping more than one credit card.
    
6. Avoid Joint Applicants: This kind of situation can bring down your credit score. If the joint applicant has not paid the dues on time,it will affect the CIBIL score of the second applicant too. Go for independent loans for maximum benefits.

Majority of the financial organizations trust the accuracy of the CIBIL scoring rate better than other credit bureaus in India.

Why Your Credit Score is Important

Understanding the importance of your credit score and taking proactive steps to build and maintain a positive credit history is essential. Your credit score is a crucial factor that influences your financial opportunities. It serves as a snapshot of your creditworthiness and plays a significant role in various aspects of your life. Lenders may use your credit score to assess your reliability and trustworthiness.

When it comes to borrowing money, a good credit score can make all the difference. It determines the interest rates and loan terms you'll be offered. A high score makes you more likely to secure loans with favourable terms, saving you money in the long run. It also increases your chances of renting an apartment or getting approved for a mortgage.

Maintaining a healthy credit score opens doors to better financial opportunities and saves you money in the process.

Reasons for Low CIBIL Scores

Discover the common reasons for low CIBIL scores, limiting loan and credit opportunities. Learn more below.

• High Credit Utilisation: Excessive credit card usage can lead to a high credit utilization ratio, negatively impacting your CIBIL score.
• Payment History: Consistently missing or delaying payments can significantly lower your CIBIL score, highlighting a lack of financial discipline.
• Multiple Loan Applications: Making frequent loan applications within a short period can signal financial instability and reduce your CIBIL score.
• Late Payment: Regularly paying bills after the due date reflects poorly on your creditworthiness, resulting in a lower CIBIL score.

Improve your CIBIL Score after Loan Settlement

After a loan settlement, you can still take steps to improve your CIBIL score. Here's how:

1. Pay credit card bills and EMIs on time to enhance your credit report.
2. Upgrade your score by changing the account status from "Settled" to "Closed" after clearing all debt to increase CIBIL  score from 600 to 750.
3. Pay loans and credit cards promptly to boost your credit report.
4. Settle unpaid dues to prevent further negative impact on your score.
5. Obtain a credit card and make timely payments, or get one against a fixed deposit if your score is low.
6. Get a No Objection Certificate (NOC) from your credit card provider within 45 days of closing the card.
7. Keep an eye on your score to avoid risky financial behaviour and track progress.

How to Maintain Your Cibil Score

Building or improving your CIBIL score for easy credit access and added benefits? Follow these measures.

• Paying bills on time: Ensure timely payment of bills to demonstrate financial responsibility and maintain a positive credit history.
• Keeping credit utilisation low: Aim to use a small portion of your available credit to keep your credit utilisation ratio low, which positively increases CIBIL  score.
• Maintaining a diverse credit mix: Having a mix of credit types, such as credit cards, loans, or a mortgage, can showcase your ability to manage different forms of credit responsibly.
• Avoiding unnecessary credit inquiries: Limit the number of credit inquiries as each inquiry can slightly impact your score. Only apply for credit when necessary.
• Lengthening credit history: Keeping accounts open for a longer duration helps establish a solid credit history, showcasing your ability to maintain credit relationships over time.

Hence, a good CIBIL score indicates that the applicant follows disciplined repayment and spending habit. Financial organizations will approve loans for those applicants who maintain a good CIBIL score.
 
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FAQs 

1. What is a good CIBIL score range?
A good CIBIL score range typically falls between 750 and 900, indicating a high level of creditworthiness.

2. What is the minimum Cibil Score required for a loan?
The minimum CIBIL score required for a loan varies among lenders, but generally, a score of 650 or above is considered acceptable.

3. How Long Does it Take to Improve Credit Score?
Improving a credit score can take time and varies depending on individual circumstances. It generally takes several months to see noticeable improvements, but significant changes may take up to a year or more.

4. How often should I check my Cibil Score?
It is recommended to check your CIBIL score at least once a year to monitor your credit health and detect any discrepancies.

5. Can closing credit cards improve my Cibil Score?
Closing credit cards can potentially impact your CIBIL score but in a bad way. It is advisable to maintain a mix of active credit accounts for a healthy credit profile.

6. How long does it take to rebuild a poor Cibil Score?
Rebuilding a poor CIBIL score can take time. It depends on the individual's financial behavior and can take several months to years.

7. Can I negotiate with creditors to improve my Cibil Score?
Negotiating with creditors may not directly improve your CIBIL score, but it can help resolve outstanding debts and prevent further negative impacts.