Getting rejected for a personal loan or credit card? Your CIBIL score might be the culprit. In India, over 79% of loan applications with scores below 650 face rejection, while applicants with 750+ scores enjoy instant approvals and lower interest rates.
Whether you’re planning to buy your dream home, start a business, or need emergency funds, knowing how to improve CIBIL score is crucial. This comprehensive guide reveals 10 proven strategies to increase your credit rating from 600 to 750+ and unlock better financial opportunities.
What is a CIBIL Score and Why Does It Matter?
A CIBIL score is a three-digit number between 300 and 900 that represents your creditworthiness. Calculated by TransUnion CIBIL, India’s leading credit bureau, this score tells lenders how reliably you repay debts.
Here’s what different score ranges mean for your home loan or business loan applications:
750-900: Excellent – Premium loan offers with lowest interest rates 700-749: Good – High approval chances with competitive rates
650-699: Fair – Moderate approval odds, higher interest rates 600-649: Poor – Limited options, stringent conditions Below 600: Very Poor – Most applications rejected
Banks and NBFCs check your score before approving any credit. A strong score can save you lakhs in interest payments over your loan tenure.
How is Your CIBIL Score Calculated?
Understanding the calculation helps you know where to focus your improvement efforts. According to credit reporting agencies, your score depends on:
Payment History (35%): Your track record of paying EMIs and credit card bills on time Credit Utilization (30%): How much of your available credit limit you use Credit History Length (15%): How long you’ve been using credit Credit Mix (10%): Balance between secured and unsecured loans Recent Inquiries (10%): New credit applications in recent months
The payment history carries maximum weightage, making timely payments the most critical factor in how to increase CIBIL score effectively.
How to Improve CIBIL Score: 10 Proven Ways
1. Pay All Bills and EMIs Before Due Dates
This is the golden rule of credit management. Every late payment gets reported to CIBIL and damages your score for up to 7 years.
Set up automatic payments for your personal loan EMIs and credit card bills. Even a single delay of 30+ days can drop your score by 50-100 points. If you’ve missed payments before, start a clean streak today – consistent on-time payments for 6 months show significant improvement.
Pro tip: Pay bills 2-3 days before the due date to account for processing delays, especially during weekends or holidays.
2. Keep Credit Utilization Below 30%
Your credit utilization ratio is the percentage of your total credit limit that you’re currently using. Financial experts recommend staying below 30% for optimal scores.
For example, if your total credit card limit across all cards is ₹2,00,000, keep your outstanding balance below ₹60,000. High utilization signals credit dependency to lenders reviewing your business loan application.
If you’re consistently maxing out cards, request a credit limit increase or distribute expenses across multiple cards to lower individual utilization rates.
3. Maintain a Healthy Credit Mix
Lenders prefer borrowers who can handle both secured loans (backed by collateral like home loans or car loans) and unsecured credit (credit cards, personal loans).
Having only credit cards makes you appear riskier than someone with a balanced portfolio. Consider taking a small secured loan if you only have unsecured credit, but never borrow unnecessarily just to improve your mix.
The ideal ratio suggested by credit monitoring platforms is 60% secured and 40% unsecured debt.
4. Avoid Multiple Loan Applications Simultaneously
Each loan or credit card application triggers a “hard inquiry” on your credit report. Multiple hard inquiries within 3-6 months suggest credit hunger and can reduce your score by 5-10 points per inquiry.
If you’ve been rejected recently, wait at least 3 months before applying elsewhere. Instead, use pre-qualified offers that involve only soft inquiries, which don’t impact your score.
Research shows that 6+ inquiries in 6 months can drop your score by up to 60 points, severely affecting your home loan eligibility.
5. Never Close Old Credit Cards
Your credit history length contributes 15% to your score calculation. An old credit card with 8 years of history is gold for your credit profile, even if you rarely use it.
Closing old cards shortens your average account age and reduces your total available credit, increasing your utilization ratio. Keep these cards active with small monthly transactions like utility bill payments.
According to Investopedia, maintaining accounts for 10+ years can boost your score by 20-30 points compared to someone with a 2-year credit history.
6. Check Your Credit Report for Errors
Nearly 1 in 4 credit reports contain errors that could be dragging down your score. Common mistakes include incorrect personal information, accounts that don’t belong to you, or duplicate loan entries.
Get your free credit report annually and scrutinize every detail. If you spot errors, immediately raise a dispute on the CIBIL website with supporting documents. Corrections typically take 30-45 days but can improve your score by 50-100 points.
Discover more from Creditcares
Subscribe to get the latest posts sent to your email.
