10 Effective Ways to Improve Your CIBIL Score

One of the first things any lender evaluates while assessing your Home Loan application is your CIBIL score. To get a loan on your terms, such as getting your desired loan sanction, a reasonable interest rate and attractive refinancing options, your CIBIL score must be high enough to support your Home Loan demands.

Your CIBIL score is calculated and made known to you by the Credit Information Bureau (India) Limited (CIBIL) – one of India’s most bankable credit bureaus. The score is a 3-digit numeric indicator of your credit health, ranging from 300 to 900, calculated taking several aspects into account. Here are a few factors the bureau examines while calculating your CIBIL score:

1. Repayment Pattern: Your repayment history and patterns are investigated while assessing your credit profile
2. Credit Mix: The bureau also considers your credit mix, i.e., what types of credit obligations you have and how prompt you are in their repayment
3. Credit Utilisation Ratio: If your credit report displays a tendency of seeking several loans repeatedly, the bureau may dock points from your CIBIL score

Seeing as your CIBIL score is a direct report of your financial standing and repayment capacity, lenders rely on it significantly to determine the loan terms they can offer you. Bajaj Housing Finance considers a score of 750+ as the ideal CIBIL for a Home Loan. However, a score of 725+ is the minimum CIBIL requirement for a Home Loan application. Refer to the table below to assess your current CIBIL score:

Also Read: Understanding CIBIL Score Ranges

1. ​​​Check your credit report annually to understand your financial situation and correct any errors or omissions. Contact your previous lender if any closed debts are not updated.​​

2. ​​​Opting for longer repayment tenures reduces your monthly debt obligations, keeping your debt-to-income ratio in check.​​

3. ​​​Taking cash advances indicates poor financial management and negatively affects your credit score. Instead, consider secured loans like a gold loan to meet your cash needs.​​

4. ​​​If you have no credit history, apply for a durable consumer loan like financing a smartphone or laptop. Paying EMIs on time will help establish a credit history and improve your CIBIL score.​​

5. ​​​If possible, request a higher credit card limit to keep your credit utilization below 30% and improve your score. For example, if you spend Rs 40,000 monthly, a higher limit will keep your utilization rate low.​​

6. ​​​Applying with multiple lenders out of desperation can harm your creditworthiness. Wait for lender approval, improve any shortcomings, and wait at least six months before reapplying.​​

7. ​​​Utilize windfall gains or salary increments to make prepayments towards your debts. This helps close loans early, reduces interest payments, and improves your credit score.​​

8. Set up automated EMI payments to avoid missing deadlines and ensure timely payments.​​

9. ​​​Aim for a well-diversified debt portfolio to account for up to 10% of your overall credit score. For example, separate loans for home renovation and a vehicle purchase instead of using a personal loan for both.​​

10. ​​​Refrain from becoming a co-applicant or guarantor for someone with poor creditworthiness, as it can negatively impact your own credibility and make you responsible for their debts.​​

​​​Remember, these steps will help you improve your CIBIL score over time by demonstrating responsible financial behavior.​​

Employing these measures will help you enhance your credit score, giving you a stronger chance of securing a Home Loan that addresses your needs and expected home buying costs. You can also consider applying for a Home Loan with a co-applicant to boost your chances of loan approval.

Also Read: Steps to Check Your CIBIL Score for Free