Importance of CIBIL Score & Tips To Improve It

When opting for a loan, the two main aspects to look for are the rate of interest and quick approval – and one major factor that determines both is your CIBIL score, also known as credit score. Read on to know the importance of CIBIL score, and tips to improve it in India. 

Importance of Credit Score  

When approaching a financial institution or a bank for a loan, the lender thoroughly checks the CIBIL score and credit report before determining eligibility. When one’s credit score is below 600, lenders usually do not even consider the application for sanction. Alternatively, a high credit score will not only ensure faster sanctioning but also fetch the cheapest loan interest rates.  

The CIBIL score leaves a first impression of the borrower on the lender – the higher the score, the better your credit ratings and consequently, the chances of getting the loans approved faster.  

Here is a chart of the acceptable CIBIL score in India ranging from 300 to 900. Ideally, a score of 700+ is considered loan-worthy in the country. 

CIBIL Score	Creditworthiness	Loan Approval
750-900	Excellent	Excellent
700-750	Very good	Very high
650-700	Fair	Good
600-650	Poor	Difficult
Less than 600	Very Poor	Low

Also Read: Tips to Maintain Your Business CIBIL Score Above 700 

Tips to Improve CIBIL Score

If your credit score falls below the satisfactory level, there are a few things you can do to boost it. Check out the following tips to improve the CIBIL score.

Clear Dues on Time

Delay in paying your dues not only makes you prone to a penalty but also lower your credit score. Therefore, to improve your score, work on paying the dues on time – set reminders and be organized with your credit and use services that allow you to pay bills automatically so you need not miss out on any deadlines.

Plan Your Credit Prudently

Be prudent when taking a loan – avoid opting for multiple or new debts. To prevent the credit score from crashing, you will have to repay the amount before taking another. Opting for multiple loans at the same time will give out the impression that you are not in a financially stable position to repay the same, which further lowers the CIBIL score.

Maintain a Healthy Mix of Credit

When taking a loan, such as a Loan Against Property or Home Loan, be sure to have the right combination of secured and unsecured loans over a long repayment period to build a good credit score. 

Also Read: What Is Credit Mix and How Can It Improve Your Credit Score? 

Watch Your Credit Limit

Only opt for new credit when there is an urgent requirement because too much debt will affect your credit score.

Monitor Joint Accounts Monthly

Make sure your joint account holder has no debts or missed payments that may affect your credit history. Regular monitoring is required to keep a track of the default payments, if any.

Also Read: How Does a Joint Home Loan Affect Your Credit Score?

Review Your Credit History

The chances of errors are high when updating CIBIL records, incorporating false information and delaying reports. Therefore, to ensure all the previous information has been updated, have your credit history reviewed regularly and get the errors rectified. 

Thus, in a nutshell, you can improve your CIBIL score by paying your bills on time, meeting your monthly dues, and being wise when using credit. Keeping track of the credit score with a CIBIL score calculator is also a great idea to stay informed.