8 Simple Tips to Improve your CIBIL Score

A CIBIL score is an important factor that is taken into consideration by lenders at the time of approving your loan or credit card application. Lenders such as banks and non-banking finance companies want to make sure you have the ability to repay the loan amount. With the help of the CIBIL score, lenders get an idea on the status of your credit worthiness. Therefore, it is important to have a high CIBIL score.

What is a CIBIL Score?

A CIBIL score is a numerical representation of an individual's creditworthiness. It acts as a snapshot of your financial status and helps lenders predict whether the chances of you turning into a defaulter. A CIBIL score is calculated by TransUnion CIBIL credit bureau and it ranges between 300-900. The closer your CIBIL score is to 900, better the chances of getting a loan or a credit card with better benefits and interest rate. CIBIL is licenced by the Reserve Bank of India (RBI). Generally, lenders consider a CIBIL score of 750 and above as ideal. If your CIBIL score is less than 750, here are 7 quick steps that will immediately improve your CIBIL score:

1. Pay all the bills/EMIs on time: Your repayment history accounts for 35% of your CIBIL score. Therefore, it is extremely important to pay your bills on time as it will help in improving your CIBIL score. You should avoid delaying payments as it will negatively hamper your CIBIL score. Make sure you pay your credit card bills and home loan EMIs on time. There are several simple ways that will help you pay your bills on time. For example, you can give standing instructions to your bank to pay off your credit card bill automatically before the due date. Do not pay minimum amount due on your bills as it will reflect badly on your credit score. It suggests that you are struggling to repay your credit debts. Also, if you keep paying minimum amount due on your bills, you might end up paying a huge amount in interest fees.  
2. Clear off all the dues: Make it a priority to pay all your credit card balance dues. Also, if you have any unpaid loans, pay them off at the earliest. One of the keys to increase your CIBIL score is having a good repayment behaviour. You should always spend only that amount that you can repay within the time of the billing date. Ideally, you should have only 2-3 credit cards as it makes it easier to keep track of payments.
3. Don’t remove old accounts: Avoid closing credit card accounts that have a decent credit history as it will adversely affect your credit score. A good repayment behaviour reflects positively on you credit score. It is advised to keep all your accounts open as it will help you in building a healthy credit history.
4. Dispute errors at the earliest: An error in your CIBIL report brings down your CIBIL score. If you come across any errors in your CIBIL report, you should raise a dispute and get it resolved at the earliest. Your CIBIL report might show that a loan is still open even if you have made all the repayments on time. Such errors have a negative impact on your credit score. Lenders can also make mistakes while entering your data. After your error is resolved, the same will be reflected on your CIBIL score.
5. Maintain low credit utilisation ratio: Credit utilisation is the second biggest factor that affects the credit score. The total amount due accounts for 30% of your credit score. Ideally, you should use around 20%-30% of the credit limit on your credit card. There are several ways to minimise the credit usage on your cards. You should not come across as credit hungry and therefore you should make an effort to use a reasonable amount of credit.
6. Apply for secure credit card: People who have a low CIBIL score find it difficult to get a credit card. In such a situation, they can apply for a secure credit card. Popular banks offer a security credit card against a fixed deposit. Paying all the dues on the secured card on time will help you improve your credit score.
7. Limit credit inquiries:  If you apply for a loan or credit card, you trigger an enquiry from banks or NBFCs to check your credit score. Such enquiries made by lenders are called as hard enquiries and they bring down your credit score. Therefore, make sure to know your credit score before applying for a credit, thereby limiting the number of credit inquiries.
8. Increase Credit Limit: One of the fastest ways to increase your CIBIL score is to increase the limit on your credit card. A credit limit is the maximum amount you can spend on your credit card. You can either apply for a new credit card with a higher limit or increase the limit on your existing credit card. A higher credit card limit essentially means a stronger buying power. At the same time, it also gives you an opportunity to lower your credit utilisation ratio, thereby helping you boost your credit score

If you have a low CIBIL score, you can take all the aforementioned steps to improve your CIBIL score. A high CIBIL score is your ticket to good financial health.