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CIBIL is one of the major credit rating agencies in India which conducts a thorough evaluation of credit activities to produce a credit report. While approving your loan application, lenders check the CIBIL score, a three-digit number indicating your creditworthiness.

Therefore, before opting for a loan, make sure to check your CIBIL score first. In this article, you will learn some great tips to keep your CIBIL score high and about CIBIL score calculation to help you stay prepared before seeking credit.

How to Build a Solid CIBIL Score in 4 Simple Ways?

Following are four effective tips you can apply to improve your CIBIL score:

Repay Your Dues in Time

To increase your CIBIL score, make sure to repay your credit card bills and other dues in time. This will help you avoid late processing charges. But more importantly, it shows that you are in control of your finances and pay your bills on time. Therefore, it helps to improve your CIBIL score significantly. On the other hand, your credit score will suffer if you fall behind on EMI payments and eventually default on your loans.

Keep a Low Credit-Utilisation Ratio

Even if you get a high spending limit on your credit card, refrain from using it till its full exhaustion. Generally, a credit utilisation rate of 30% is favourable to keep your CIBIL score healthy. Therefore, you can pay your dues as early as possible to stay within this limit. In addition, opt for a higher limit on your credit card to keep your utilisation ratio low.

Do Not Apply for Multiple Credit Cards

Credit cards can be beneficial when you are applying for a loan. However, having too many of them with high utilisation value on each of them may backfire. Therefore, before you apply for a credit card, check your loan eligibility and choose lenders who are more likely to approve your application.

Furthermore, applying for too many credit cards within a short span shows that you are desperate for financial support or have a spending problem. Thus, it brings down your creditworthiness and score. Moreover, if you have to apply for multiple loans, ensure sufficient gaps between the applications.

Do Not Remove Old Accounts from the Credit Report

After paying their debts, some people attempt to delete old accounts, inactive accounts, or accounts with a poor credit history from their credit records to make them look better. However, this may not be the best course of action. While it is true that negative reports hurt your credit scores, it is also true that after a certain amount of time, they are automatically deleted.

Consequently, getting old accounts deleted forcefully could significantly lower your score as it might have indicated a solid history of payments otherwise. Additionally, if you have paid off your bills, it increases your credit score and establishes your dependability.

What is CIBIL Score Range

CIBIL demonstrates the evaluation result of your credit activity through a three-digit score. It ranges between 300-900, where a score above 700 is considered favourable for a loan application. Check out the table of CIBIL score range and their ratings below:

CIBIL Score RangeRating
300 to 500Poor
550 to 650Average
650 to 750Good 
750 - 900Excellent                        

 

Generally, to avail of an unsecured loan, such as a personal loan, you may need a score of 750 or above. However, even if you don’t have a score of 750, there is no reason to worry. With minor changes in your financial activities, you can improve the CIBIL score, making a significant difference to your credit profile.

How is CIBIL Score Calculated

There are five key factors that are taken into account while doing a CIBIL score calculation. They include:

Payment History: It holds 30% weightage in your CIBIL score and indicates how many outstanding bills you have and on-time EMI paying behaviour. According to a CIBIL investigation published by the Financial Express, a 30-day delay can lower your CIBIL score by 100 points.

Credit Utilisation Rate: The credit utilisation ratio holds 25% weightage in the credit calculation. Ideally, you should not utilise more than 30% of your whole credit card limit. High credit utilisation indicates desperation for credit and financial difficulties.

Type of Loan You Choose and its Repayment Duration: The duration of credit indicates your experience in handling loans. Therefore, having a long tenure and different kinds of loan with a healthy credit history will have a positive impact on the score. It contributes to 20% of your CIBIL score calculation.

Other Factors: Among other factors, an important one is how many times you have applied for credit and how many of them got rejected. Naturally, a higher number of loan rejections will have a negative effect on your CIBIL score.

Finally, all you have to do is practise these simple methods to produce a perfect CIBIL score. Note that a healthy credit history and sound financial planning go a long way. Moreover, you can get attractive offers from various lenders, reducing your EMI burden for a long time.

 

Disclaimer: This article is a paid publication and does not have journalistic/editorial involvement of Hindustan Times. Hindustan Times does not endorse/subscribe to the content(s) of the article/advertisement and/or view(s) expressed herein. Hindustan Times shall not in any manner, be responsible and/or liable in any manner whatsoever for all that is stated in the article and/or also with regard to the view(s), opinion(s), announcement(s), declaration(s), affirmation(s) etc., stated/featured in the same.

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