How Long Does it Take to Improve a CIBIL Score?

In India, four credit information bureaus are authorised to collect information on credit users and assign them credit scores. These credit information bureaus are Experian, Equifax, CRIF High Mark and TransUnion CIBIL. Of these four, TransUnion CIBIL is preferred by most lenders to access applicants’ credit reports.  

The credit score that TransUnion CIBIL assigns credit users is known as the CIBIL score. The bureau assigns a credit score after assessing various factors, such as the borrower’s credit history, outstanding debt, credit exposure, and new credit applications. The CIBIL score varies between 300 and 900 and reflects a borrower’s creditworthiness and ability to repay loans on time. The higher a borrower’s CIBIL score or the closer it is to 900, the higher their creditworthiness and therefore, their ability to avail of credit.  

Why are Credit Scores Important?

Your credit score plays a key role in determining your eligibility for a loan, among other factors such as your income, age, and employment type. When you apply for credit, the lender assesses your CIBIL report to assess your creditworthiness. Typically, a good CIBIL score of 750 or above is preferred by lenders.  

Further, the lender also decides the terms and conditions of the loan based on your credit score. Borrowers with strong CIBIL scores are more likely to secure favourable loan terms and competitive interest rates. 

Also Read: Importance of CIBIL Score and Tips to Improve It  

What is a Good Credit Score Range?

If your CIBIL score lies between 750 and 900, it is within the good credit score range. A high credit score indicates consistent EMI payments low credit utilisation ratio, and a balanced credit mix.

Borrowers with CIBIL scores between 700 and 750 may have missed one or two EMI payments in the past but are otherwise consistent in managing their loan and credit card payments. Such borrowers may not find it challenging to be approved for a loan. 

However, if your CIBIL score falls below 650, you may face some difficulty in loan approval. In this case, you will have to improve CIBIL score and then apply for credit.    

How Long does it Take to Rebuild Credit Score?

Rebuilding your credit score depends on several factors, and the time it takes can vary. Understanding the factors that influence your score can help you manage the process effectively. While you may notice improvements within a few months, significant changes often take longer and depend on your financial habits and past credit activities. Key factors that impact credit score improvement include your payment history, credit utilisation ratio, credit history length, and the diversity of your credit types.  

Timely loan and credit card EMI payments are the most important contributors to a better score, as late payments can significantly harm it. The credit utilisation ratio, which reflects how much credit you have used compared to your total credit limit, is another significant factor. Maintaining low balances relative to your credit limits demonstrates responsible credit management and positively impacts your score. 

Keeping older credit accounts is beneficial because they provide a longer track record of credit behaviour. Additionally, having a mix of credit types shows that you can manage different forms of credit effectively. Lastly, applying for a loan only when required can help you reduce the number of hard enquiries, as several such enquiries can affect your credit score negatively. Following these tips can help you in rebuilding your credit score easily. 

Best Ways to Improve Your Credit Score

1.Pay Bills and EMIs on Time

If your credit score is low, start by ensuring timely payments for credit card bills and loan EMIs. Your repayment history accounts for 35% of your credit score, making it the most important factor. Set reminders to avoid missing due dates or automate payments.

2.Maintain a Low Credit Utilisation Ratio

Avoid exhausting your credit card limits and only paying the minimum due, as this results in a high credit utilisation ratio. Aim to keep your credit utilisation ratio below 30% to maintain and improve your CIBIL score.

3.Avoid Frequent Credit Applications

Applying for multiple credit cards or loans within a short period can negatively impact your score. To focus on credit improvement, limit new credit applications for some time.

4.Regularly Check Your CIBIL Report for Errors

Sometimes, a credit score drops due to incorrect information reported by lenders. Monitor your CIBIL report regularly, and if you identify any errors, report them immediately to ensure your score reflects accurate information.

5.Balance Your Credit Mix

Having a good balance of credit types, such as a mix of secured loans (e.g., Home Loans) and unsecured credit (e.g., credit cards), reflects your ability to manage different forms of credit responsibly. A balanced credit portfolio can positively impact your CIBIL score.

Also Read: Tips to Help You Improve Your CIBIL Score 

Final Words

If you are planning to apply for a loan such as a Housing loan or loan Against Property, know that your credit score will play a key role in determining your loan eligibility. Maintain a good CIBIL score to ensure easy approval and favourable loan terms.