Your CIBIL score plays a huge role in whether you get a loan or not. This score shows how reliable you are when it comes to repaying loans and handling credit. Banks and financial institutions look at your CIBIL score before they decide to approve or reject your loan application.
A high CIBIL score means that you are more likely to get a loan, often with better terms like lower interest rates. A low score, on the other hand, makes it hard to get loans, or you might have to accept higher interest rates. But don’t worry—if your CIBIL score is low, there are ways to improve it.
Understand the CIBIL Score Range
Before you work on improving your score, it’s important to understand where you stand. CIBIL scores range from 300 to 900, with 900 being the best score. A score between 300 and 549 is considered very poor. A score between 550 and 700 is fair, and anything above 750 is great.
Most lenders prefer to give loans to those who have scores above 750, so the closer you are to 900, the better your chances.
Simple Steps to Boost Your CIBIL Score
1. Pay Your EMIs on Time
One of the easiest ways to improve your CIBIL score is to pay your monthly loan installments (EMIs) on time. Late payments, even by a few days, can hurt your score. To avoid forgetting, set up automatic payments or reminders for your EMI due dates. This ensures you never miss a payment and helps in keeping your score healthy.
2. Hold On to Old Credit Cards
If you have old credit cards, don’t rush to close them. Having a long credit history is good for your CIBIL score. The older the credit card, the better it shows that you can manage credit over a long period. Of course, you should ensure you are paying the full bill on time every month. If you do, holding on to old credit cards will help boost your credit score.
3. Watch Your Credit Utilization
Your credit utilization ratio is the amount of credit you use compared to your total credit limit. Try to keep this ratio low—ideally, under 30% of your available credit. For example, if your total credit limit is ₹1,00,000, try not to use more than ₹30,000 at a time. If you often reach your credit limit, it can lower your score. One solution is to request your bank to increase your credit limit so that your usage percentage stays low.
4. Choose Longer Loan Tenures
When taking out a loan, go for a longer tenure if possible. This will make your monthly EMIs smaller and easier to pay on time. As you pay your EMIs consistently, your CIBIL score will improve. A longer repayment period can also help in managing your finances better, reducing the risk of defaulting on payments.
5. Avoid Taking Multiple Loans at Once
Taking too many loans at the same time can damage your credit score. Lenders may think you are in financial trouble if you apply for multiple loans in a short period. Try to avoid this by repaying one loan fully before taking another. By doing so, you’ll show lenders that you are responsible for your credit, which will improve your score over time.
Fix Errors in Your CIBIL Report
Sometimes, your CIBIL report might be mistaken. These could be wrong details or delays in updating information. Even a small mistake can lower your credit score. To avoid this, check your CIBIL report regularly. You can download your report online from the CIBIL website.
If you find any errors, you can file a dispute with CIBIL using their online dispute resolution form. Fixing these mistakes will improve your credit score, but remember that this process can take some time—up to a few months.
Final Thoughts: Stay Patient and Consistent
Improving your CIBIL score doesn’t happen overnight. It might take anywhere from six months to a year of disciplined effort to see noticeable results. By staying on top of your EMI payments, managing your credit cards wisely, and avoiding unnecessary loans, you’ll be on your way to a better credit score and easier access to loans in the future. Keep an eye on your CIBIL report and take proactive steps to maintain a good score for long-term financial health.
