5 tips to improve CIBIL Score

Updated: 16 September 2023

Published: 8 June 2022






CIBIL Score

CIBIL stands for the Credit Information Bureau (India) Limited, which is licensed by the Reserve Bank of India. A CIBIL score is a three-digit numerical number that is counted from an individual's credit history. A person's credit history is found in the credit information report (CIR)  and it is the payment history across loan types and credit institutions over a period of time. CIBIL is one of the important factors which comes into consideration when a person applies for a loan. A CIBIL Score of more than 700 is considered to be good when applying for loans. Read to know about the tips that you should follow to improve your CIBIL Score.

Tip 1. Repay on time

Delayed payments can affect the CIBIL score badly. Paying the dues on time can increase your CIBIL score, but if an individual delays the payment it adds to the next payment cycle with increased interest.

Tip 2: Balancing between secured and unsecured loans or credits.

There are broadly two types of loans, secured loans, and unsecured loans. Secured loans are the one that requires collateral as the condition of borrowing loan amount from banks, NBFC, or from financial institutions. On the other hand, unsecured loans are signature loans that do not need any collateral. If an individual applies for many unsecured loans simultaneously it will impact the CIBIL score in a negative way. Hence, it is recommended to balance the number of unsecured and secured loans and pay their EMIs regularly.

Tip 3:  Remember about credit limit

It is recommended to apply for new credit within the limit of an individual. One should not present that he or she is always in a need of credit. Only apply for new credit if you need it and can repay it as opposed to wanting it. Too much debt can affect your credit score.

Tip 4: Frequency of loan applications

If an individual keeps on applying for a loan at regular intervals of time it will impact the credit score in a negative way. The reason for the same is the lender's agent is required to fetch your credit reports and credit agencies such as CIBIL keep track of this activity. Such bank inquiries might lower one's CIBIL score as well and have further consequences.

Tip 5: Increase credit limits

Increasing the credit limits will automatically decrease your credit utilization ratio and hence impacts the credit score in a positive way. Before the additional spending, it is advisable to increase the credit limit.

Conclusion

If a person is thinking of applying for a loan whether it is a business, personal or home loan one should always check their CIBIL score prior to knowing the chances of its approval. A CIBIL score of more than 700 is considered to be a good score for loan approval swiftly. Follow the tips mentioned above to increase and maintain your credit score. Other than this it is recommended to be patient and persistent to increase the score. The words “ persistence is the key” suit well for the cibil score. Check your CIBIL score instantly with My Mudra and get to know about the eligibility criteria for the application of your loan.

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