Here’s What You Can Do to Improve Your CIBIL Score

The CIBIL score is a three-digit number between 300 and 900 that reflects a borrower’s creditworthiness and repayment capacity – the higher a borrower’s CIBIL score, i.e., the closer it is to 900, the better their chances of availing of a loan on low-interest rates and other beneficial terms and conditions.

Credit information bureaus collect information on credit users and how they use credit and based on this information, they assign a credit score to a borrower. Credit rating agencies consider several different factors, such as the borrower’s credit history and age, credit exposure, hard enquiries, delinquencies, etc., while deciding a borrower’s credit score. TransUnion CIBIL is the most popular credit information bureau in India and it is used by most banks and NBFCs. The credit score that TransUnion CIBIL assigns to borrowers is known as the CIBIL score and the records based on which TransUnion CIBIL assigns these scores are known as CIBIL records.

The CIBIL score is one of the key metrics that lenders check when a borrower applies for a loan. Lenders check a borrower’s credit score to assess their creditworthiness. A good CIBIL score serves as a good first impression. Borrowers whose CIBIL score is between 750 and 900 are considered low-risk borrowers by lenders and therefore, lenders easily grant loans to such individuals. Further, a good CIBIL score also gives borrowers high negotiating power, allowing them to request a lower interest rate, higher loan sanction and longer repayment tenor. A low CIBIL score, on the other hand, reduces one’s eligibility for a loan. Borrowers are thus advised to perform a CIBIL score check before making a loan application. If their free CIBIL score check delivers a low score, they must take measures to improve CIBIL score first and then apply for any types of loans, such as Home loan or loan against property. The question is how to check CIBIL score.

It is actually quite easy to check your CIBIL score. Simply follow these steps to perform a CIBIL score check.

• Go to the official website of CIBIL and select the ‘Get Your CIBIL Score’ option.
• During the next step, you will be required to enter certain details, such as your name, address, email address, date of birth, PIN Code, etc. You will also be required to attach an ID proof, such as your passport or Aadhar. So, keep the required documents ready with you.
• After filling in all the details, click on ‘accept and continue.’
• After this, you will receive an OTP on your phone. Enter the OTP and select ‘Continue.’ Next, choose ‘Go to Dashboard’ and then, ‘Check Your CIBIL Score’ You will then be taken to myscore.CIBIL.com. Log in to your account and you will be able to see your CIBIL score.

Also Read: How to Check Your CIBIL Score for Free 

Now that we know how to check CIBIL score, let us bring our focus to the more important topic: how to improve CIBIL score.

Tips on How to Improve CIBIL Score

If you want to improve CIBIL score, here are a few tips that will help.

Clear All Credit Card Bills and EMIs on Time

Depending on the credit scoring model being used, your credit history makes up 35% to 40% of your credit score. Thus, it is one of the most important factors that affect your credit score. If you want to improve CIBIL score, never delay or miss EMI payments and credit card due dates. Some people miss EMIs and credit card payments not because they do not have the money but because they forget deadlines. If you are one of these people, set up auto-payments or reminders. This way, you will not only protect your CIBIL score but will also save yourself from having to pay a late fee and other penalties.

Maintain a Healthy Credit Mix

Borrowers who have a healthy mix of different types of credit usually have a good CIBIL score, mostly because lenders see such borrowers as responsible individuals who can handle all types of credit. To improve CIBIL score, maintain a diverse mix of different credit products. For instance, if you are already repaying a secured loan, such as a home loan, consider taking an unsecured loan, such as a car loan. Pay off these loans without missing any EMIs and your CIBIL score will automatically improve.

Keep Your Credit Utilization Ratio Below 30%

The credit utilization ratio is the ratio of credit used to credit available. Borrowers who exhaust their credit card limit are considered highly dependent on credit, which lenders do not see as a good thing. Thus, a high credit utilization ratio leads to a low CIBIL score. Borrowers who only pay the minimum amount due on their credit card also automatically have a high credit utilization ratio. Thus, if you want to give a boost to your CIBIL score, keep your credit utilization ratio below 30%. Pay the entire amount due and not just the minimum amount due on your credit card. Further, if you are an impulsive spender, ask your credit card company to customise your spending limit. This will help you keep your credit utilization ratio below 30%.

Do Not Close Old Loan Accounts and Credit Cards

Another factor that affects your credit rating or credit score is the age of your credit history – the older your credit history, the better your credit score. Sometimes, borrowers make the mistake of closing old loan accounts and credit cards after they have paid off the loan. This causes their credit history to get deleted, which in turn, makes their CIBIL score drop. So, borrowers must maintain all old loan accounts and credit cards. If you want to close the credit cards that you no longer use because of the fee they require you to pay, request your lender to switch your credit card to a no-fee card or a one-time fee card but do not close the account.

Check Your CIBIL Report Often

Checking your CIBIL report once every short while is important for two reasons. First, when you check your CIBIL report, you understand why your CIBIL score has dropped and the areas you must work on to improve CIBIL score. Second, borrowers must also check their CIBIL report to make sure there are no errors in it. Sometimes, banks and NBFCs pass on wrong information to credit rating agencies, which leads to a borrower’s CIBIL score taking a hit. Such errors must be immediately reported.

Also Read: 7 Tips to Help You Improve Your CIBIL Score

Do Not Apply for Too Many Loans at One Time

When a borrower applies for a loan, the lender enquires about them. This enquiry gets registered as a hard enquiry. Too many loan applications lead to too many hard enquiries, which in turn, portray a borrower to be too dependent on credit. Too many hard enquiries, therefore, cause a borrower’s CIBIL score to go down. Therefore, borrowers working on enhancing their CIBIL score must not make too many loan applications simultaneously.

Final Words

Borrowers planning to apply for a loan in the near future must perform CIBIL score check at least six months in advance so that they have ample time to take corrective measures in case their CIBIL score is not up to the mark.