Effective Ways to Improve Your CIBIL Score

A CIBIL score is a three-digit number that reflects an individual’s creditworthiness. It is generated by TransUnion CIBIL, one of India’s leading credit bureaus, based on a person’s credit history and repayment behaviour. The score typically ranges from 300 to 900, with a higher score indicating stronger credit management.

This score is calculated using several factors, including repayment history, credit utilisation, length of credit history, credit mix, and recent credit enquiries. Among these, repayment history carries the highest weight. Even a single delayed payment can negatively affect your CIBIL score.

The importance of a CIBIL score lies in how lenders use it to assess loan and credit card applications. When you apply for a Home Loan, the lender checks your CIBIL score to evaluate your creditworthiness. A higher score improves your chances of approval and often helps you secure a lower interest rate and better loan terms. On the other hand, a low score can lead to a higher interest rate or unfavourable borrowing terms.

One of the primary factors considered when assessing your Home Loan application is your CIBIL score. To get a loan on your terms, such as getting your desired loan sanction, a favourable 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 the credit bureaus in India. 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., the types of credit obligations you have and how prompt you are in your 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

CIBIL score is a direct report of your financial standing and repayment capacity, it plays a key role in determining the loan terms that can be offered to you. Bajaj Housing Finance considers a score of 750+ as the ideal CIBIL score for a Home Loan. Refer to the table below to assess your current CIBIL score:

Also Read: Understanding CIBIL Score Ranges

1. ​​​Check your credit report regularly to understand your financial situation and correct any errors or omissions.

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

3. ​​​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.​​

4. ​​​Applying for credit with multiple lenders can harm your creditworthiness. Wait for approval and in case your application is rejected, improve on the shortcomings, and wait at least six months before reapplying.​​

5. ​​​Utilise windfall gains or salary increments to make prepayments towards your debts. This can help close loans early, reduce interest payments, and improve your credit score.​​

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

7. ​​​Aim for a well-diversified debt portfolio. For example, separate loans for home renovation and a vehicle purchase instead of using a personal loan for both.​​

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

Employing these measures can help you enhance your credit score, giving you a stronger chance of securing a Home Loan that addresses your expected homebuying cost. 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

Improving your CIBIL score is a gradual process, and the time it takes depends largely on what is affecting your score in the first place. If your score has dropped due to minor issues, such as a single delayed EMI or slightly high credit utilisation, you may start seeing improvement within 3 to 6 months. Regular on-time payments and bringing credit card usage below comfortable limits often help the score recover steadily during this period.

In cases where the score is impacted by multiple missed payments or high DPD entries, recovery usually takes longer. It may take 6 to 12 months of consistent, timely repayments to see meaningful improvement. For serious credit issues, such as loan defaults, settlements, or write-offs, improvement can take a year or more.