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

Understanding 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, and delinquencies 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 may easily grant loans to such individuals.

Further, a good CIBIL score can allow borrowers to negotiate for a lower interest rate, higher loan sanction, and longer repayment tenure. A low CIBIL score, on the other hand, can reduce one’s eligibility for a loan. Borrowers are thus advised to perform a CIBIL score check before making a loan application. If they have a low score, they must take measures to improve their CIBIL score first and then apply for any loan such as a Home loan or Loan Against Property.

Step-by-Step Guide to Check CIBIL Score Online

It is easy to check your CIBIL score online. Simply follow these steps: 

1. Go to the official website of CIBIL and select the ‘Get Your CIBIL Score’ option.
2. During the next step, you will be required to enter certain details, such as your name, address, email address, date of birth, and PIN Code. You will also be required to attach an ID proof, such as your Passport or Aadhaar.
3. After filling in all the details, click on ‘Accept and Continue.’
4. After this, you will receive an OTP on your phone. Enter the OTP and select ‘Continue.’
5. Next, click on ‘Go to Dashboard’ and then ‘Check Your CIBIL Score’. You will then be taken to myscore.CIBIL.com.
6. 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 

Tips on How to Improve Your CIBIL Score

If you want to improve your CIBIL score, here are a few tips that can 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 your CIBIL score, never delay or miss EMI payments and credit card due dates. Set up auto-payments or reminders to pay bills on time. This way, you will not only maintain a good 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 improve.

Keep Your Credit Utilisation Ratio Below 30%

The credit utilisation ratio is the ratio of credit used to credit available. Lenders view borrowers who exhaust their credit card limits as overly reliant on credit, which is generally unfavourable. Thus, a high credit utilisation 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 utilisation ratio. Thus, if you want to give a boost to your CIBIL score, keep your credit utilisation ratio below 30% and pay the entire amount due and not just the minimum amount due on your credit card. 

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 may close their old loan accounts and credit cards after they have paid off the loan. This causes the credit history to get deleted, which in turn, decreases their CIBIL score. So, borrowers must maintain all old loan accounts and credit cards. 

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 your CIBIL score. Second, borrowers must also check their CIBIL report to make sure there are no errors in it. Such errors must be reported immediately.

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 reviews their credit report, resulting in a hard inquiry. Numerous loan applications generate multiple hard inquiries, suggesting that the borrower relies heavily on credit. Too many hard enquiries, therefore, cause a decrease in the borrower’s CIBIL score. Therefore, one must not make multiple loan applications simultaneously.

Final Words

If you are planning to apply for a loan in the near future should perform a CIBIL score check so that you have ample time to take corrective measures in case your CIBIL score is not up to the mark.