How to increase your CIBIL score

Are you looking to increase your CIBIL score? We discuss all methods to boost credit scores, from paying off credit card balances to disputing inaccuracies

Last Updated: Oct 22, 2024, 15:52 IST3 min

Kanwaljit Singh Founder and Managing Partner at Firesi...

Wondering how to increase your CIBIL score? The interchangeably used terms credit score and CIBIL score are slightly different—while the CIBIL score is awarded by the Credit Information Bureau India Limited (CIBIL), a credit score can be provided by any of the credit bureaus in India. However, regardless of whether your credit score is good or CIBIL score, it can be dubbed your financial passport, which opens doors to many opportunities. A good credit score is key, from getting approved for a mortgage to snagging a sweet apartment rental.

Staying on top of your bills, managing your debt wisely, and making payments on time are some ways to keep a good credit score. In doing so, you"re setting yourself up for financial success down the road. In this blog, we have compiled different ways to increase CIBIL score.

What is the CIBIL score?

What is CIBIL? CIBIL, or the Credit Information Bureau Limited, is India"s leading credit information company. It maintains credit records of individuals and businesses and generates credit scores used by lenders to assess creditworthiness. A higher CIBIL score indicates better creditworthiness, facilitating access to credit on favourable terms.

Best ways to increase CIBIL score

Without further ado, let’s learn how to increase your CIBIL score:

Check credit report

Obtain a copy of your credit report from the credit bureaus. Review it carefully to ensure that all the information is accurate and up-to-date. Look for any errors or discrepancies that may negatively impact your credit score. If you find any inaccuracies, take steps to correct them promptly by contacting the credit bureau and providing supporting documentation.

Eliminate your credit card balance

One of the most effective ways to improve credit scores is to pay off credit card balances. Aim to eliminate outstanding balances or at least reduce them significantly. This demonstrates responsible credit management and can positively impact your credit utilisation ratio (discussed later).

Show good debt

Having a mix of various types of credit accounts, including credit cards, loans, and mortgages, can demonstrate to lenders that you can manage multiple forms of debt responsibly. However, be mindful of taking on too much debt and ensure you can comfortably afford the repayments.Pay EMI regularly

Consistently paying your EMIs (Equated Monthly Instalments) on time is crucial for maintaining a good credit history. Late and missed payments could negatively impact credit scores. You can set up reminders to ensure you never miss a payment deadline.

Increase your credit limit

You can also increase your credit limit to improve your credit score, particularly on your credit cards. A higher credit limit can lower your credit utilisation ratio, assuming you maintain the same level of spending. Contact your credit card issuer for a credit limit increase, but be cautious not to increase your spending along with it.

Pay attention to credit utilisation ratio

It is the amount of credit you"re using compared to the total available credit. It plays an important role in determining your credit score.

To demonstrate good credit management, keep this ratio below 30 percent. Paying down existing balances and avoiding maxing out your credit cards are some of the practices that can lower your credit utilisation ratio and improve your credit score.

Frequently Asked Questions (FAQs)

What is an average credit score?An average credit score typically ranges between 580 and 689, with higher scores indicating better creditworthiness. While specific definitions may vary among credit bureaus and lenders, a score above 700 is considered good, and scores above 800 are considered excellent.

Do banks use CIBIL score?Banks and financial institutions in India commonly use CIBIL scores as part of their credit evaluation process when assessing loan and credit card applications.

Why is my CIBIL score minus 1?A CIBIL score of -1 typically indicates that there is insufficient credit history available to generate a credit score. This can happen if you have not borrowed or used credit in the past or if your credit history is very limited. To improve your credit score, consider building a positive credit history by using credit responsibly and making timely loan payments.

Is credit card good or bad?Whether a credit card is considered good or bad in India depends on how the individual manages it. Credit cards can offer various benefits such as convenience, rewards, and building credit history when used responsibly. However, if mismanaged, credit cards can lead to debt accumulation, high interest charges, and a negative impact on credit scores. Therefore, using credit cards wisely, making timely payments, keeping balances low, and avoiding unnecessary debt is essential.

First Published: Oct 22, 2024, 15:52

Credit Information Bureau India Limited (CIBIL)Credit Information Bureau Limited

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