How to Improve Your CIBIL Score?

Posted on Monday, March 27th, 2023 | By IndusInd Bank

Your CIBIL score reflects how responsibly you have managed loans and credit cards. A higher score can improve your chances of getting approved for loans and credit cards on better terms.

There is no instant way to increase your CIBIL score. The most reliable approach is to make timely payments, keep your credit usage low, maintain older accounts responsibly, and check your credit report regularly.

1. Pay Your Bills on Time

Payment history is one of the most important factors affecting your CIBIL score. A missed EMI or credit card payment can negatively affect your credit profile.

Set up payment reminders or auto-debit instructions so that your EMIs and credit card bills are paid before the due date. Pay the Total Amount Due on credit cards whenever possible. Paying only the Minimum Amount Due keeps the account regular but allows interest to continue accumulating.

If you have missed a payment, clear the overdue amount as soon as possible and maintain timely payments going forward.

2. Maintain a Low Credit Utilization Ratio

Credit utilisation is the portion of your available credit limit that you are currently using.

For example, if your credit limit is ₹1 lakh and your outstanding balance is ₹40,000, your utilisation is 40%. A consistently high utilisation ratio can make you appear financially stretched.

Keep your credit card balances low and avoid using the entire available limit. If you have multiple cards, monitor both individual-card and total credit utilisation.

3. Monitor Your Credit Report Regularly

Check your CIBIL report regularly to confirm that your personal details, loan accounts, payment history, credit limits, and account status are accurate.

Look for errors such as:

• Incorrect overdue amounts
• Payments shown as missed
• Accounts that do not belong to you
• Duplicate loan or credit card accounts
• Closed accounts shown as active

Raise a dispute with CIBIL and inform the concerned lender if you find incorrect information. Checking your own CIBIL score does not reduce it.

4. Keep Older Credit Accounts Active

The age of your credit accounts contributes to your credit history. An older credit card with a clean repayment record can support your profile.

Do not close an old credit card only because you have stopped using it. First check its annual fee, usage requirements, and overall value. If the account has no significant cost and is well managed, keeping it active can help preserve your credit history.

Always close unused accounts properly and obtain confirmation from the issuer.

5. Avoid Making Too Many Credit Inquiries

Every time you apply for a loan or credit card, the lender usually makes a hard inquiry on your credit report.

Applying for multiple products within a short period can make it appear that you are depending heavily on credit. Apply only when you genuinely need the loan or card. Compare available options first and submit applications selectively.

Checking your own credit report is different from applying for new credit and does not negatively affect your score.

6. Request a Higher Credit Limit

A higher credit limit can reduce your credit utilisation ratio if your spending remains unchanged.

For example, if your outstanding balance is ₹30,000, increasing your limit from ₹1 lakh to ₹1.5 lakh lowers the utilisation percentage. However, a higher limit should not encourage additional spending.

Request a higher limit only when your income, repayment record, and spending discipline support it. The lender will assess your profile before approving the request.

Keep Building Good Credit Habits

Improving your CIBIL score requires consistent financial discipline. Pay your bills on time, keep outstanding balances low, avoid unnecessary applications, and review your credit report for errors.

A strong score is built over time, not through a single payment or a new credit card. Use credit only for planned expenses and borrow amounts that you can repay comfortably.

Frequently Asked Questions

Q1. How long does it take to improve a CIBIL score?

The time depends on the reason for the low score and your repayment behaviour. Timely payments and lower credit utilisation can gradually improve your profile, but accurate changes also depend on when lenders report updated information.

Q2. What is considered a good CIBIL score for loan approval?

CIBIL scores range from 300 to 900. A higher score generally indicates lower credit risk. Many lenders consider scores above 750 favourably, but approval also depends on income, existing obligations, repayment history, and the lender’s policy.

Q3. Can closing a credit card improve my CIBIL score?

Closing a credit card does not automatically improve your score. It can reduce your total available credit and increase your utilisation ratio. Consider the card’s fees, age, repayment record, and impact on your overall credit profile before closing it.

Q4. Does having a mix of secured and unsecured credit improve a CIBIL score?

A balanced mix of secured and unsecured credit can support a healthy credit profile. However, you should not take a loan simply to create a credit mix. Repaying every credit account on time is more important.

Q5. Why is maintaining a long credit history important for a good CIBIL score?

A longer credit history gives lenders more information about your repayment behaviour. Keeping older, well-managed credit accounts active can help demonstrate consistent financial discipline.