Credit & Debt Management
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To improve your CIBIL score, make sure you pay your loan EMIs and credit card bills on time. Try to keep your credit card utilisation below 30% of your available limit, avoid submitting multiple loan applications within a short period, and regularly review your credit report for any errors or discrepancies. Improving your credit score takes time, so maintaining these healthy financial habits consistently over several months can help strengthen your credit profile.
How to Improve CIBIL Score Quickly?
A low CIBIL score doesn’t mean you’re out of options. With consistent financial habits, you can gradually improve your credit score and strengthen your credit profile. Start by making your Personal Loan EMIs and Credit Card payments on time, keeping your credit utilisation under control, and regularly monitoring your credit report.
In India, CIBIL is one of the leading credit information companies, and banks and financial institutions use CIBIL scores to evaluate a borrower’s creditworthiness. A score of 700 or above is generally considered good, while a lower score may make it more difficult to qualify for loans or secure favourable terms.
Here are seven practical ways to improve your CIBIL score and maintain a healthy credit profile:
Review Your CIBIL Report for Accuracy
It’s extremely important to ensure that all information on your CIBIL report is accurate. A mistake or a discrepancy that’s reflecting on your CIBIL report can negatively impact your CIBIL score.
If you notice any inaccurate information, outdated information or missing information, raise a dispute with the Transunion CIBIL and your lender. This is the closest you can get to a quick CIBIL fix.
Remember: Pulling your own CIBIL report does not impact your CIBIL score.
Get a Mixed Bag of Credit
You’ll want to establish a mix of credit types, with some short-term low-interest loans, a few credit cards, and a few secured long-term loans like car loans or home loans. This helps you build up your credit score and shows lenders that you can manage your finances responsibly. Taking too many unsecured loans might seem like a negative to the banks; therefore, maintaining a credit mix with both secured and unsecured loans becomes important.
Set up Payment Reminders to Pay Your Dues on Time
Consistently paying your bills on time can raise your score within a few months. A single missed or late payment can have a significant negative impact on your credit score. To ensure that you pay your dues on time, write down payment deadlines for each bill in a planner or calendar and set up reminders online.
You can also consider enrolling for auto payments through your lender or bank to have your payments directly debited from your bank account.
Fix Your Credit Utilization Ratio
If your credit card account balances exceed 30% of your borrowing limit every month, it’s a red flag because your CIBIL score is suffering. Even if you are paying off your balances in full every month on the due date, it may reflect as outstanding in your credit report because your creditor reports the information to the credit bureau once a month and the date could be before your due date. So, it’s a good idea to consider pre-paying some of the balance before the due date to keep you above the 30% mark every month.
Convert Your High-Interest Debt into EMIs Through Debt Consolidation
If you are having trouble making your payments because of the high-interest loan rates on credit card accounts and other loans, convert your multiple debts into EMIs by paying it off using a low-interest personal loan through debt consolidation. You can then choose your repayment schedule according to your financial capability and pay back the borrowed amount through affordable EMIs. The advantage of taking a personal loan to pay off your existing debt is the interest rate; it’s nearly half of credit card interest rates
Pay More Than Once in a Billing Cycle
Making payments once in a month is good but not great for your CIBIL Score. Your creditors report balances to the credit bureaus every month. If you have big balances, it could mean that you are overusing your credit.
If you enjoy good financial standing, the best thing you could do is pay more than one monthly payment. It definitely reduces your debt faster; it also reduces your credit utilization ratio and improves your CIBIL Score.
Pay Down “Maxed Out” Cards First To Lower Credit Utilization Ratio
When you are using multiple credit cards, it is advisable to pay down the card that’s about to max out the limit first. This strategy will help lower the credit utilization ratio and give a boost to your CIBIL score.
Build a Strong Credit Age
A good average credit age would be more than 5 years. The longer your positive credit history is, the better is your credit score.
If your credit history is short, there’s not much you can do. One option: Piggyback to be an authorized user on a family member or a friend’s credit card if they have a good and long credit history. However, it’s easier said than done because it may be challenging for you to find somebody who willingly adds you as an authorized user because they would be the ones responsible for any charges you make on the credit card. Other option: Be patient and don’t close any accounts.
If you have no history at all, it may take three to six months from the beginning date to see any activity being reported on your credit reports. One option to establish a credit history is to take a credit card, make small purchases that you can afford to repay, and pay the balance in full every month.
Remember: Use your credit card wisely. Otherwise, instead of helping you establish a credit history, a credit card can get you caught in the web of debt.
Maintain Older Credit Cards To Build a Long and Healthy Credit History
As mentioned in point 7, the age of your credit history has a significant impact on the CIBIL score. It reflects your experience in handling credit. If you’ve old credit cards, it’s important that you maintain them and keep paying the bills on time in full every month. Do not close them, even if you are not using them anymore. If you must close, close the newer ones.
Keeping your old credit cards open helps you build a long and healthy credit history, thus improving your credit score.
Open New Credit Cards Only If You Really Need It
Think deeply about whether you need to open additional credit card accounts at all. Having many open accounts that you are not using will only accrue charges while giving you no other major edge if you are working to improve CIBIL score.
Avoid Applying for Credit Multiple Times, Too Frequently
Every time you apply for a new credit account, the lender pulls up your credit report. Every pull is considered a hard inquiry, which can lower your score temporarily. Refrain from applying for several loans or credit cards within a short time. Keep your hard inquiries to a minimum by shopping around, comparing the offers, and then applying with the lender offering you the best deal.
Choose a Tenure in Which You Can Comfortably Pay the EMIs
As mentioned in point 2, regular and timely payments improve CIBIL score. So, when borrowing a loan, it’s always safe to choose a longer repayment tenure. This ensures lower EMI, which you can comfortably pay, thus decreasing the chances of defaulting, delaying or skipping your EMIs.
Remember: If you can afford to pay larger EMIs, choose a shorter tenure. By doing so, you’ll pay off the borrowed money faster and save money on interest.
In short, if you want to improve CIBIL score, focus on reducing your high outstanding amounts and maintain a healthy credit history by making timely payments and managing your credit accounts in a disciplined manner. You might not be able to fix your CIBIL immediately, but with patience and consistency and a little help from Freo.Money, you will succeed in the end.
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Frequently Asked Questions
1. How can I improve my CIBIL score quickly?
You can improve your CIBIL score by paying EMIs and credit card bills on time, keeping credit utilisation low, avoiding multiple loan applications, maintaining a healthy mix of credit, and checking your credit report regularly for errors. Consistency is key, as your score may take time to reflect these positive changes.
2. How long does it take to improve a CIBIL score?
The time required varies depending on your credit history and financial behaviour. Consistently making timely payments and managing credit responsibly over several months can help improve your CIBIL score.
3. What is a good CIBIL score in India?
A CIBIL score ranges from 300 to 900. Generally, a score of 750 or above is considered strong and can improve your chances of getting approved for loans and credit cards on favourable terms.
4. Does paying EMIs on time improve my CIBIL score?
Yes. Timely repayment of loan EMIs can positively impact your credit history. Consistently paying your EMIs by their due dates demonstrates responsible credit management.
5. Does paying my credit card bill in full improve my CIBIL score?
Paying your credit card bill in full and on time can help maintain a healthy credit profile. It also prevents the accumulation of interest and helps you avoid carrying high outstanding balances.
6. What is the ideal credit utilisation ratio for a good CIBIL score?
It is generally advisable to keep your credit utilisation below 30% of your total available credit limit. Lower utilisation can indicate that you are managing your available credit responsibly.
7. Can closing a credit card reduce my CIBIL score?
Closing a credit card may affect your credit profile, particularly if it reduces your overall available credit or shortens your credit history. Before closing an old card, consider how it may affect your overall credit utilisation and credit history.
8. Does applying for multiple loans affect my CIBIL score?
Multiple loan applications within a short period can result in several hard enquiries on your credit report, which may negatively affect your credit profile. It is better to apply for credit only when necessary.
9. Can I improve my CIBIL score without taking a new loan?
Yes. You do not need to take a new loan to improve your CIBIL score. Paying existing EMIs and credit card bills on time, keeping credit utilisation low, and maintaining a responsible credit history can help strengthen your score.
10. How often should I check my CIBIL report?
Regularly reviewing your CIBIL report can help you identify incorrect personal details, unfamiliar accounts, or inaccurate payment information. Checking your report periodically also allows you to raise disputes and get errors corrected when necessary.
11. Can correcting errors in my CIBIL report improve my score?
Yes, if your credit report contains inaccurate information that is negatively affecting your score, getting the error corrected may improve your credit profile. Review your report carefully and raise a dispute with the relevant lender or credit bureau when required.
12. Does having a mix of secured and unsecured loans affect my CIBIL score?
A healthy mix of secured and unsecured credit can contribute to a well-rounded credit profile. However, you should not take a loan simply to diversify your credit mix. Responsible repayment and overall credit management are more important.
Naina Rajgopalan
Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She's been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo, a neobank that offers flexible and customised financial products, along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.
