How to Attain a Good CIBIL Score Always?

Updated on: 10 Jan 2024 // 4 min read // Credit Cards
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CIBIL is the Credit Information Bureau (India) Limited. Credit score by CIBIL is the credit rating benchmark in India. Maintaining a good CIBIL score brings you closer to getting fast loans, and your applications are considered worthy of loan approval. Likewise, a low CIBIL score is greatly responsible for the rejection of your loan application.

So, let’s find out below what CIBIL Score is and how the score is calculated. Further, we will explore practical ways to improve your CIBIL score.

A CIBIL Score is a three-digit number that is used to represent the credit history of the individual or entity. The score value lies in between 300 to 900. The greater the score, the better is your creditworthiness. As a rule of thumb, a score of 700 or more is considered ideal for availing a loan or credit card.

A good credit score determines the approval of your personal loan or credit card application. Having a higher score ensures chances of success, while a lower score leads to a rejection of the credit application. A CIBIL Score plays a very important role in determining the relationship between you and the lender.

It is thus very important to have a good CIBIL score and stay creditworthy always.

CIBIL Score Calculation

The calculation for CIBIL score is not a formula bound. However, it does involve certain parameters to adjudge the rating of the prospect. Here is the list of factors that play a role in the calculation of CIBIL Score.

1. Credit History:

The most important aspect in reviewing a person’s credit score is credit history. It gets the highest weightage in the calculation of the CIBIL score. Credit history has a weightage of about 30% to the total credit score, according to the CIBIL.

2. Credit duration and mix:

Well, the portfolio of loans and length of credit history contributes about 25% to the total score. Whether you have more of secured or unsecured loans, also affect your credit rating.

3. Exposure to credit:

How much you owe, compared to your income determines 25% of your rating.

3. Other factors:

Your recent credit queries and credit utilization ratio contribute to the remaining 20% of the score. 

How to Improve Your Credit Score?

Having known the various criteria for score calculation, let us now find out Ways to improve your CIBIL Score.

Timely payments: 

When a bank lends money, it expects timely repayment. As discussed, the Credit Score depends upon your repayment history. Irregular or late repayments have a great impact on your CIBIL score. To ensure a good CIBIL score, make sure you pay all of your loan EMIs, and credit bills on time. Irregular payment history makes you unfit for paying your debts, and hence it decreases your CIBIL score.

The credit utilization percentage:

The percentage of credit limit you use every month also determines your credit health. Thus, you must be careful to not exhaust your credit limit on the card every month.

A right mix of secured and unsecured loans:

To maintain a good score, it is important to have lesser unsecured loans and Credit Card Balance. You must balance your profile with the right mix of secured loans at the same time. Unsecured loans generally have a higher interest rate and reflect your dependence on credit at a greater rate. This gradually lowers your CIBIL score.

Lesser number of credit applications:

Every time you apply for a loan, it reflects on your credit information report. Making too many loan queries, make you look credit hungry, while a low number of queries make you look financially stable.

Maintain old credit cards:

Maintaining a good history on an old credit card is the key to improving your CIBIL score. It makes you creditworthy as your credit history shows a track record of regular repayment. Thus lenders do not need to think before offering you a loan. People with good CIBIL score often are known to maintain a proper card and payment routine keeping track of the bills.

Paying timely EMI:

Timely payment of your instalments builds the trust of your bank and hence leads to a good CIBIL score.

Achieving a good CIBIL score is thus not a tall task. All it requires is financial discipline. To maintain your score, you must always look for the back-up methods to pay out loan EMIs on time. This builds your credibility by maintaining a score above 750 to 800 always which is an excellent score to consider.

One of the major benefits of having a good CIBIL score is that you can raise the loan as and when you need it. Your bank will pre-approve credit card limit expansion, personal loans, and other financial products with a good score. And you will become credit ready always.

Also Read: Everything You Need to Know About a Good Credit Score

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