How to Increase Your CIBIL Score
Introduction
Has there ever been a time when you applied for a loan or credit card, only to find out that your application was denied? Many people in India don’t know what a CIBIL score is, why it matters, and how it can affect their ability to borrow money.
In this blog, we will explain everything you need to know about the CIBIL score in very simple English. You’ll learn what it means, why it’s important, and most importantly, how you can increase your score and maintain it. Whether you’re a student, a salaried employee, or a business owner, improving your CIBIL score will help you in the long run.
What is a CIBIL Score?
The CIBIL score is a three-digit number that shows how trustworthy you are when it comes to repaying borrowed money. The score ranges from 300 to 900. The nearer your credit score is to 900, the higher your likelihood of being approved for loans or credit cards by banks and other financial institutions.
This score is calculated by a company called TransUnion CIBIL, one of the four credit bureaus in India. It is based on your credit history, which includes your loan repayments, credit card usage, and other financial activities.
A high score means you are financially responsible and are likely to repay your debts on time. A low score shows that you might not have paid loans or credit card bills on time in the past.
Why is Your CIBIL Score Important?
Your CIBIL score offers a brief reflection of how responsibly you handle your finances. Lenders and banks rely on this score to assess whether you're a trustworthy candidate for loans or credit cards, helping them determine your ability to repay without difficulty.
Your CIBIL score gives a quick overview of how dependable you are with managing credit. Just like schools give marks to show how well a student is doing, your CIBIL score shows how well you are managing your loans and credit. Banks, credit card companies, and other lenders look at this score before giving you any loan or credit card.
It helps them evaluate whether you’re a reliable and low-risk borrower. If your score is high, it tells them that you usually pay your bills on time and are responsible with money. This makes them feel confident that you will repay the loan without causing problems.
On the other hand, if your score is low, they may feel unsure about lending you money. They might worry that you won’t repay on time or may stop paying in the future. So, your CIBIL score plays a very important role in whether you get approved for a loan or credit card, how much money you can borrow, and what interest rate they will charge you.
In short, your CIBIL score is a quick way for lenders to judge your financial trustworthiness. That’s why keeping a good score is so important for your financial health.
If you have a good score, you are more likely to get:
- Loans at lower interest rates
- Credit cards with better rewards and limits
- Faster approval for loans and credit cards
- Higher chances of getting home or car loans
On the other hand, if your score is low, lenders might:
- Reject your loan or credit card application
- Offer loans at higher interest rates
- Ask for a guarantor or collateral
- Approve smaller loan amounts
So, having a good CIBIL score can save you a lot of money and trouble.
What Causes a Low CIBIL Score?
Before learning how to improve your CIBIL score, it’s important to understand what brings it down. Some of the common reasons include:
- Failing to make timely payments on your EMIs or credit card dues
- Using too much of your credit limit
- Having too many unsecured loans like personal loans
- Applying for many loans or credit cards in a short time
- Having no credit history at all
- Repaying a loan for less than the full amount originally borrowed
- Having errors or wrong information in your credit report
Now that we know what harms your score, let’s move on to how you can fix it.
How to Increase Your CIBIL Score – Simple and Practical Tips
1. Pay Your Bills on Time
This is the most important step. Always pay your credit card bills, EMIs, and any other dues before the due date. Even one late or missed payment can have a negative effect on your credit score. Set reminders or use auto-debit options to avoid forgetting.
2. Keep Credit Card Usage Low
If you have a credit card with a limit of ₹1,00,000, try to use less than ₹30,000 per month. This shows that you are responsible and do not depend too much on borrowed money. Using more than 50% of your credit limit regularly can hurt your score.
3. Avoid Taking Too Many Loans
Every time you apply for a loan or credit card, the lender checks your credit report. This is called a hard inquiry. Too many hard inquiries in a short period can lower your score. So, apply only when necessary.
4. Maintain a Mix of Credit
Having both secured loans (like home or car loans) and unsecured loans (like personal loans or credit cards) is good for your score. It indicates that you are capable of managing various forms of credit in a responsible manner.
5. Do Not Close Old Credit Cards
If you have an old credit card with a good repayment history, keep it open even if you don’t use it much. It helps build a long credit history, which is good for your score. Closing old cards can actually bring your score down.
6. Check Your Credit Report Regularly
Mistakes can happen. Sometimes, your credit report might show wrong information, like a loan you never took or a missed payment that you actually paid on time. Regularly reviewing your credit report—at least once a year—and promptly addressing any errors is essential.
You can get one free credit report every year from CIBIL by visiting their official website.
7. Don’t Settle Loans Unfairly
If you are unable to repay a loan, try to talk to the bank and come up with a repayment plan. Settling a loan by paying only part of the amount can harm your score badly. It stays on your report for years and makes banks think you might not repay in the future.
8. Build a Credit History if You Don’t Have One
If you have never taken a loan or used a credit card, you may not have a credit score. In this case, lenders cannot judge your creditworthiness. You can start by getting a secured credit card (against a fixed deposit) and using it wisely to build a good score over time.
How Long Does it Take to Improve a CIBIL Score?
Raising your CIBIL score is a gradual process that takes time and consistent effort. It takes time, discipline, and good financial habits. If your score is low, it may take several months or even a year to see a big improvement.
However, small positive changes can be seen in just a few months if you follow the steps above. The key is to stay consistent and patient.
Things to Avoid if You Want a Good CIBIL Score
While we talked about what you should do, here are a few things you should not do:
- Don’t ignore your payment due dates
- Don’t max out your credit cards
- Don’t apply for multiple loans at once
- Don’t close all your credit accounts suddenly
- Don’t co-sign loans for others unless you fully trust them
- Don’t ignore communication from lenders regarding missed payments
Being careful with your finances today will help you tomorrow.
Myths About CIBIL Score
Let’s clear up some common myths that people believe about CIBIL scores.
Myth 1: Reviewing your own CIBIL score does not impact it in any way
Fact: This is not true. Checking your score yourself is called a soft inquiry and does not affect your score at all.
Myth 2: Having no loans or credit cards means a good score
Fact: You need to borrow and repay money to have a credit history. No loans mean no score, not a good one.
Myth 3: A low score can’t be improved
Fact: With time and discipline, anyone can improve their score.
Myth 4: Income affects CIBIL score
Fact: Your salary or business income does not impact your credit score directly. Only your repayment behavior matters.
Benefits of a Good CIBIL Score
If you keep your score high, you will enjoy many financial benefits:
- Easy approval for loans and credit cards
- Lower interest rates on loans
- Higher credit limits
- Better chances of getting home, car, or personal loans
- Improved chances of renting houses or getting jobs (some companies check credit scores)
So, a good score gives you peace of mind and more control over your financial future.
Conclusion
Your CIBIL score reflects how you manage credit and handle your financial responsibilities. If you are careful, pay on time, and avoid too much debt, your score will automatically improve. It takes time, but the results are worth it.
If your score is low today, don’t worry. Start by making small changes, like paying bills on time and using your credit card wisely. Avoid common mistakes and stay patient. Over time, you will see your score go up and your financial opportunities grow.
Remember, your CIBIL score is your financial reputation. Maintain it with the same attention and care you give to your health. A strong score will help you reach your dreams, whether it's buying a home, starting a business, or simply living a worry-free life.
Start today. Your future self will thank you.