How To Improve CIBIL Score? In Depth Guide

Written by: Kaushik Jethva

Last Updated: June 24, 2023

credit score report with keyboard
Credit score report with keyboard

When you start on a journey to secure your financial future, one of the most crucial steps you’ll take is learning how to improve CIBIL score. It’s not just a set of numbers; your CIBIL score is a representation of your creditworthiness. Here’s a detailed guide that demystifies the process and tells you how to improve CIBIL score effectively.

1 What is CIBIL Score?

Before we dive into the strategies on how to improve CIBIL score, it’s essential to understand what it is. CIBIL, or the Credit Information Bureau (India) Limited, is one of the primary credit bureaus in India that provides credit scores, also known as the CIBIL score. This score ranges from 300 to 900, with 900 being the best possible score. A higher CIBIL score enhances your chances of getting loans and credit cards at favourable terms. Thus, knowing how to improve CIBIL score is indispensable.

2 Why is it Important to Improve CIBIL Score?

Improving your CIBIL score is not just about numbers; it’s about securing your financial health. A good CIBIL score could mean lower interest rates on loans, higher chances of loan approval, and more negotiating power. By understanding how to improve CIBIL score, you’re not only gaining lenders’ trust but also saving money in the long run.

3 Step-by-Step Guide on How to Improve CIBIL Score

1. Keep an Eye on Your Credit Report

Knowing where you stand is the first step in understanding how to improve CIBIL score. Obtain a free copy of your credit report from the CIBIL website. Thoroughly review your report for errors or discrepancies. If you find any, don’t hesitate to report them to CIBIL.

2. Clear Outstanding Dues

Outstanding dues and delayed payments are detrimental to your CIBIL score. Settle any outstanding payments, be it credit card bills or loans, as quickly as possible. It is crucial to understand that prompt payment history is vital in learning how to improve CIBIL score.

3. Maintain a Low Credit Utilisation Ratio

Maintaining a low credit utilisation ratio is a relatively unknown yet effective way how to improve CIBIL score. It’s the ratio of the amount of credit you use to the amount of credit available to you. Experts suggest keeping this ratio below 30%.

4. Diversify Your Credit

Another savvy strategy for improving your CIBIL score is by diversifying your credit. Having a mix of secured and unsecured loans shows lenders that you are capable of handling different types of credit responsibly.

5. Don’t Make Too Many Credit Inquiries

credit inquiry
credit inquiry

Making too many credit inquiries in a short span can cause your CIBIL score to plummet. Lenders may perceive this as credit hunger, which is why it’s important to apply for credit judiciously.

6. Opt for a Longer Tenure on Loans

While it may mean more interest paid over time, opting for a longer tenure can ensure your EMIs are manageable. This, in turn, helps in maintaining a good repayment history, which is essential in understanding how to improve CIBIL score.

7. Maintain Old Credit Accounts

Length of credit history plays a significant role in your CIBIL score. Don’t be too quick to close old credit accounts; having a longer credit history can positively impact your CIBIL score.

8. Become a Joint Account Holder or Get a Secured Credit Card

If you don’t have a credit history, it’s challenging to display your creditworthiness. A smart move in learning how to improve your CIBIL score is to become a joint account holder or get a secured credit card. Secured credit cards are backed by a fixed deposit, which acts as collateral. Using this card responsibly can help in building a good CIBIL score.

9. Keep Track of Joint Accounts

When you are a joint account holder or have a guarantor, make sure that the other party is prompt in credit repayments. Their actions can directly impact your CIBIL score.

10. Negotiate with Your Lenders

If you have a history of delayed payments due to financial hardships, it’s worth negotiating with your lenders. They might be willing not to report the delay to the credit bureau, which can be beneficial in your pursuit of how to improve CIBIL score.

11. Monitor Your Loan Accounts for Identity Theft

Identity theft can wreak havoc on your CIBIL score. Regularly monitor your loan accounts and credit report for any unauthorised activities and report them immediately.

12. Maintain Financial Discipline

Finally, the most effective way how to improve the CIBIL score is to maintain financial discipline. This includes budgeting, saving, and spending within your means. Consistency is key here.

4 Things to Avoid When Trying to Improve CIBIL Score

  • Closing Credit Cards with Outstanding Balances: This might seem like a good idea, but it affects your credit utilisation ratio negatively.
  • Applying for Multiple Loans or Credit Cards Simultaneously: As mentioned earlier, this can be viewed as credit hunger.
  • Ignoring Your Credit Report: Many people underestimate the importance of regularly checking their credit reports. Ignorance is not bliss in this case.

5 Additional Tips and Tricks

Apart from the steps mentioned above, here are a few additional tips that can accelerate your journey on how to improve your CIBIL score:

Set up payment reminders: Often, we miss payments just because we forget. Setting up payment reminders can ensure you never miss a deadline.

Increase your credit limit judiciously: If you are confident in your ability to manage credit responsibly, consider requesting an increase in your credit limit. But be cautious not to overspend.

Seek professional help if necessary: If you find it overwhelming to manage your debts and improve your CIBIL score, don’t hesitate to seek the help of a credit counsellor.

Be patient and persistent: Remember, building a good CIBIL score is more like a marathon than a sprint. Keep your eyes on the long-term benefits and stay committed to financial discipline.

6 Wrapping Up

Knowing how to improve CIBIL score is an essential component of your financial health. Your CIBIL score is not just a number – it is a reflection of your financial discipline and credibility. By actively taking steps to improve your CIBIL score, you are future-proofing yourself against economic uncertainties and ensuring that when you need credit, you will have access to it on favourable terms.

In a world where financial complexities can be overwhelming, having a good CIBIL score can be one of your most potent tools. Equip yourself with the knowledge and the diligence needed, and step into a world where your dreams are within your grasp.

So, as we conclude this comprehensive guide on how to improve CIBIL score, remember that the road to a better credit score is paved with consistent efforts, smart decisions, and an unwavering commitment to financial responsibility. There’s no better time to start than now. Your future self will thank you.

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About This Article

Kaushik Jethva
Written by: Kaushik Jethva author

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Updated: June 24, 2023
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