A healthy CIBIL score is crucial for accessing financial products such as loans and credit cards with favourable terms. Ranging from 300 to 900, it reflects your creditworthiness and determines how likely you are to repay borrowed money. Whether you’re looking to improve an existing score or maintain a good one, several actionable steps can help you achieve a better CIBIL score.
Here are some essential tips to boost your credit score:-
What is CIBIL Score?
Decoding CIBIL Scores and Credit Scores
The CIBIL score helps lenders assess your ability to repay loans. It’s calculated by using data from your credit report that includes your credit usage, credit mix, length of credit history, payment history and new credit inquiries.
Different countries have different credit rating agencies, and each has its own scoring model. CIBIL is India’s leading credit rating agency, but many others, like Experian and Equifax, also provide credit scores.
What’s the Difference Between CIBIL Scores and Credit Scores?
CIBIL score is India specific and given by Credit Information Bureau (India) Limited, and credit scores can refer from credit agencies like Experian or Equifax. CIBIL scores are based on similar factors as other credit scores, such as your payment history and debt levels, but the scoring models may differ slightly.
CIBIL scores are widely used by Indian financial institutions to evaluate loan applicants, whereas credit scores from other agencies might be used in different regions or financial systems.
6 Actionable Steps to Increase Your CIBIL Score
1. Pay Bills on Time: Payment on time is crucial to maintain a positive credit history. Use an auto-debit option or set reminders to avoid missing deadlines.
2. Reduce Outstanding Debts: Pay off credit card balances, loans, and other debts as soon as possible. The quicker you clear your dues, the better for your CIBIL score.
3. Maintain Low Credit Utilisation: Try to use no more than 30% of your available credit limit. High credit usage can lower your score.
4. Review Your Credit Report: Regularly check your CIBIL report for errors. Dispute any inaccuracies you find to ensure the score is a true reflection of your financial habits.
5. Avoid Multiple Credit Applications: Only apply when necessary. If you apply for multiple credit cards or loans in a short time frame then it can negatively impact your score.
6. Diversify Your Credit Portfolio: Mix up your portfolio with secured and unsecured credit, like loans and credit cards; which will positively affect your score.
Best Ways to Improve CIBIL Score Quickly:
1. Settle Delinquent Accounts: If you have overdue debts or collections, address them immediately. Settling old debts can give your score a significant boost.
2. Pay More Than the Minimum: Always try to pay more than the minimum due amount on your credit card. This will help you clear your balance faster and reduce interest charges.
3. Request a Higher Credit Limit: If you maintain a good payment history, consider requesting a higher credit limit. This will lower your credit utilisation ratio, which is beneficial for your score.
4. Avoid Closing Old Accounts: Keeping old credit accounts open will help extend the length of your credit history, which can improve your score.
5 . Consolidate Loans: Consolidating high-interest loans into one lower-interest loan can make repayment easier and improve your score.
6 .Consider Secured Credit Cards: If you’re rebuilding your score, a secured credit card can be an excellent tool. It allows you to build credit by using your deposit as collateral.
Examples of CIBIL Score Transformations
Many individuals have successfully improved their CIBIL score with the right approach. For instance, someone who had a score of 550 due to missed payments and high credit utilisation might improve it to 700+ within a year by making timely payments, reducing credit card debt, and managing their finances more efficiently. These transformations showcase that improving your CIBIL score is achievable with discipline and the right strategies.
Nurturing Your Credit Health for a Brighter Financial Future
Improving your CIBIL score is not just about taking short-term actions; it’s about nurturing your credit health for the long haul. Establishing good financial habits, staying disciplined with payments, and reviewing your credit report regularly will ensure that your credit score remains strong. Over time, this will help you access better loan terms, lower interest rates, and financial freedom.
One App for All Your Credit Card Needs
Managing your credit cards and payments effectively is one of the key ways to improve your CIBIL score. BharatNXT’s user-friendly app allows you to keep track of your credit card payments, vendor payments, and other financial activities. Using such apps to stay organised helps ensure that you never miss a due date, keeping your payment history intact and your CIBIL score in top shape.
Download the BharatNXT App for Vendor Payments
BharatNXT is a convenient app that helps businesses streamline their vendor payments. By managing payments through a digital platform, you can maintain better control over your cash flow and avoid overdue payments. When you pay on time, your credit score reflects your responsible financial behaviour.
FAQs
How to increase the CIBIL score?
Improving your CIBIL score is a gradual process and requires discipline. While there are no quick fixes, following a consistent approach can lead to significant improvements over time. Start by paying off any outstanding debts to reduce your liabilities. A lower balance on your credit cards and loans can positively impact your credit score. Another effective strategy is to reduce your credit utilisation ratio—keeping it below 30% of your total credit limit is ideal. Additionally, ensure that you make all your payments on time, as late or missed payments can have a negative effect on your score. Lastly, regularly monitoring your credit report for errors or inaccuracies is essential, as discrepancies can harm your score. By following these steps, you will see gradual improvements in your CIBIL score over a few months.
How Long Does it Take to Improve CIBIL Score?
The time required to improve your CIBIL score depends on the actions you take and how quickly you address issues such as missed payments or high credit utilisation. For example, if your score is affected by a few late payments, it may take anywhere from a few months to a year to see improvements, as it takes time for positive data to reflect in your credit report. If you address credit issues more urgently, such as clearing outstanding debts or reducing your credit card usage, the improvement could be quicker. However, remember that changes to your score are not instant; they happen gradually as you build a better credit history. The key is to be patient and consistently practice good financial habits.
Does Paying Credit Card Bills on Time Increase CIBIL Score?
Yes, paying your credit card bills on time is one of the most effective ways to improve your CIBIL score. Timely payments show lenders that you are financially responsible and capable of managing your credit. On the other hand, late payments have a significant negative impact on your credit score. Missing even one payment can drop your score by several points, making it harder to access future credit. By paying your bills on time every month, you can avoid late fees and interest charges while steadily improving your score. The longer you maintain a consistent payment history, the better your score will become.
What Factors Affect CIBIL Score the Most?
Your CIBIL score is influenced by several factors, with the most important being your payment history, credit utilisation ratio, length of credit history, and credit mix. Payment history, which accounts for a large portion of your score, reflects whether you’ve made timely payments on loans and credit cards. Credit utilisation, which is the ratio of your credit card balances to your total available credit, should be kept below 30% to positively impact your score. The length of your credit history also matters, as longer histories show lenders that you can responsibly manage credit over time. Lastly, a healthy credit mix, consisting of both secured (like home loans) and unsecured (like credit cards) accounts, can help boost your score by demonstrating your ability to handle various types of credit. By improving these factors, you can significantly increase your CIBIL score.
CIBIL Score Range and What It Means
CIBIL scores range from 300 to 900. Here’s what they typically mean:
- 300-549: Poor score, indicating a higher risk for lenders.
- 550-649: Fair score, suggesting moderate creditworthiness.
- 650-749: Good score, demonstrating responsible credit management.
- 750-900: Excellent score, representing a high level of creditworthiness and low risk for lenders.
Improving your CIBIL score takes time and effort, but the rewards are worth it. By following these tips and staying disciplined with your finances, you can achieve a better credit score, leading to greater financial freedom and access to better credit opportunities.