Your CIBIL score (Credit Information Bureau India Limited score) is a 3-digit number, indicating your creditworthiness. A higher CIBIL score improves your chances of getting loans at better interest rates and with faster approval. In India, a score above 700 is generally considered good. A person with no credit history has a credit score of -1.
If your score is low or you’re starting out with no credit history, don’t worry. This blog provides practical, proven, and comprehensive steps to boost your CIBIL score effectively.
1. Get a Credit Card Against Your Fixed Deposit
If you have a low or no credit score, one of the easiest ways to start building it is by getting a credit card backed by a fixed deposit (FD). Banks issue this card against the money in your Fixed Deposit Account. It can be useful if you are trying to build up your credit history or trying to repair it. Because the bank has your deposit as security, your chances of approval are very high. When you use this card to make purchases and promptly pay the credit card bill it will get reported to credit bureaus. Over time, this improves your credit history and boosts your CIBIL score.
2. Get the Maximum Credit Limit on Your Credit Cards
If you’re eligible, request the bank to increase your credit limit. The key benefit of a higher limit is that it reduces your credit utilization ratio which is the percentage of your credit limit you use. For example, if your limit is ₹1,00,000 and you spend ₹60,000, your utilization is 60%. But if your limit is ₹2,00,000, the same ₹60,000 spend means only 30% utilization. Low utilization can help to positively impact your CIBIL score.
3. Don’t Spend More Than 30% of the Credit Limit
Always aim to use less than 30% of your total available credit across all cards. High credit usage can signal financial stress, even if you pay the bills on time. For example, if your card limit is ₹100,000, try not to spend more than ₹30,000 on it. This shows lenders that you are not dependent on credit for your daily needs and that you are financially disciplined. Consistently maintaining low credit utilization helps build a good credit profile and leads to a higher CIBIL score over time.
4. Repay All Your Previous Debts
Before applying for new credit, it’s very important that you clear all your existing debts, especially those that are overdue or unpaid. Outstanding EMIs, credit card dues, or any loan defaults negatively impact your credit report. Even one missed payment lowers the CIBIL score significantly. Once you pay off your debts, ensure it reflects correctly in your credit report. It generally takes 6 months for the CIBIL score to increase once you have cleared your dues.
5. Take a Personal Loan or Gold Loan and Repay On Time
Once you’ve built some credit history, taking a small personal loan or gold loan can help improve your CIBIL Score. But the key is to repay every EMI on time without fail. Even one late payment can hamper your credit worthiness. So it’s best to take a loan which you can manage to repay.
6. Do not apply for multiple loans in multiple banks
When you apply for loans in various places, bank agents conduct an enquiry about your credit history. Your CIBIL score is checked multiple times in a span of a short time. This is known as hard enquiries. Frequent hard enquiries like these can reduce your CIBIL score by up to 50 points and make you appear credit-hungry to lenders. It is better to get your eligibility checked beforehand instead of applying everywhere.
Conclusion :
Improving your CIBIL score takes discipline, patience, and consistency. Whether you’re building your score from scratch or recovering from a low score, the steps above can help you gain financial credibility and open doors to better credit opportunities.
Need help in understanding your eligibility for a loan? You can contact us and we will be happy to guide you in your financial journey.