Credit Score

10 Great Ways to Improve Your CIBIL Score


The CIBIL scores help banks make major decisions regarding customers. These scores give an overview to the banks about whether a customer is reliable or not. Let’s start by understanding what the CIBIL score means.

What is a CIBIL score?

TransUnion CIBIL Limited keeps the Credit Information Bureau (India) Limited (CIBIL) score. The company does CIBIL score calculations for people and organizations. Banks and non-banking finance companies give CIBIL Ltd. information about their customers’ credit so that they can do calculations.

In short, the CIBIL score is a three-digit summary of a customer’s credit history. It records their loans, credit cards, delays in payments, and defaults.

CIBIL score calculations determine customers’ credit health. A good score gives them good interest rates and offers. It also helps to work out better loan terms. Service providers and utility companies might also check a customer’s score to see if there are any deposits to be made to them.

The CIBIL score is taken from a CIBIL report, also known as the Credit Information Report (CIR). It has the following:

  1. Credit score
  2. Personal and contact information
  3. Loan account details
  4. Employment details
  5. Outstanding balance
  6. Inquiry information (it means information about the number of times a customer applied for credit, every single time the lender checks the CIBIL score)

How is the CIBIL score calculated?

In terms of scale, the score ranges between 300-900. The CIR’s ‘Accounts’ and ‘Enquiries’ sections reflect customers’ credit behavior. Anything above 700 is good.

Excellent: 800-850

Very good: 740-799

Good: 670-739

Fair: 580-669

Poor: 300-579

Companies are given a CIBIL rank ranging from 1 to 10. 1 is the highest, and 10 is the lowest. Financial institutions consider rankings between 4 and 1 as good. The factors that are important for company ranking are repayment behavior and credit usage. CIBIL Ranks are only available to businesses that take credit up to Rs. 50 crores.

The following things are considered in the CIBIL score calculations for an individual:

  • Past credit behavior is important for CIBIL score calculation. It affects 35% of the credit score. The score considers installments, credit card payments, delayed payments, and defaults. 
  • Other things that affect CIBIL scores are the type of credit information and the new credits. It could affect the score positively or negatively. A positive impact on CIBIL score calculation will benefit the customer in the long term.

How can I raise my credit score?

  1. Utilize 30% of the credit limitCredit Utilization Ratio (CUR) is the ratio between the credit card limit and the amount the borrower spends. Credit cards have a monthly limit. The credit limit depends on how much a customer can repay. A customer can easily spend the whole amount, but that’s not wise. Using up to 30% of it monthly is the way to go. If the limit is INR 50,000, then use about Rs.15,000. If one overuses it, it will lower the score, as banks define it as credit-hungry behavior.
  1. Repayment on timeRepayment on or before time is good for borrowers’ CIBIL scores. Delaying the payment harms their CIBIL score. In India, there is a penalty of Rs. 400 to Rs. 1,300. So, paying on time is important. 
  2. Don’t accumulate outstanding amounts accumulateThe outstanding amount can get added on over time and become expensive. Banks offer auto-pay options to ensure timely payment. Customers should always pay the due amount before applying for new credit; this will help with CIBIL scores.
  1. Never pay minimum amountsCustomers should pay credit bills in full. It also saves them from paying the applicable interest rate. When they pay the minimum amount, the remaining outstanding amount adds up for the next month, which is not a great move.
  1. Choose the right credit card and avoid multiple applicationsWith so many options on the market, it can be hard to choose the right credit card. The customer can choose the one that best suits his or her buying habits. There are always amazing offers that various credit companies provide. One shouldn’t apply for all of them at once. Every time one applies, the issuers conduct a hard inquiry on his/her CIBIL score, which will lower one’s score. He/she must stick to one or two credits that work for him/her and enjoy the perks that come with them. 
  2. Be careful with expenses If one worries about how to improve CIBIL score, one should start with spending within the credit limit. Credit card statements are a great way to keep tabs on expenses. It contains information about transactions, limits, outstanding balances, and more. If one fears overspending, he/she should divide the expenses among credit cards. 
  3. Good credit mixCredit mix means the ratio of secured and unsecured credit. Secured credits are when one includes collateral for the loan, like assets or property. To improve a CIBIL score, one should have a balance between secured and unsecured credit. Cibil score calculations can go negative if secured or unsecured credits are greater than each other. 
  4. Check the CIBIL score regularlyWhen one regularly checks his or her CIBIL score, he/she can report an error quickly. It also helps one understand if he/she is making the right choices and how that affects the CIBIL score. It leads one to make informed decisions. 
  5. Never close a credit accountClosing an account affects the CIBIL score calculations badly. If one is unsure about using a credit card, don’t close the account. For example, if one has Rs. 50,000 in debt and a Rs. 1,000,000 credit limit on a credit card, if one doesn’t use the card for a while, the credit utilization might lessen, which is fine. But if you closed one of the credit accounts, the credit utilization rate would go down, which would hurt your CIBIL score. 
  6. Income matters Though income doesn’t directly impact the credit score, it does show up in the credit record. To get a loan, lenders look at your employment history and consistent income. If one wants to learn more about finance and needs help making smarter choices, check out Piramal Finance. Read more related blogs on the website and explore our financial products and services, such as personal loans, credit cards, and financial calculators.