This Article was fact checked and last updated for accuracy on November 17, 2024 by Mani Karthik
In this article I’ll show you how to improve CIBIL score quick and easy. In less than six months to be precise.
CIBIL score is basically a three digit numeral which can have value from 300 to 900 and used to summarize the credit history of an individual. If the score is higher, then it means that the individual is very good and trustworthy in managing his financial transactions. If the credit score is lower, then it means that the individual does not have the ability to manage the financial transactions efficiently and is not trustworthy.If the individual does not have any credit history, the score will be –1 and it will be zero if the history is less than six months.
The Credit Information report (CIR) will contain the credit score, information of the borrower like Name, DOB, address, employment details etc.It also contains all the financial transaction like loan, credit card etc and how the payments are done for each of them.
Also read: How to check CIBIL score for free!
What is CIBIL score
CIBIL is a code used to identify relevant information related to the type of loan. It is short for Credibility, Interest Rate, Balance and Loan term.
CIBIL is an acronym for Consumer International Bureau of Investigation. It is an important rating system that has been adopted by many countries around the world to assess the creditworthiness of companies. It helps lenders to avoid lending money to high-risk customers.
It was developed in order to help borrowers better understand the type of loans that they are applying for and what their obligations will be after they take it out. With this code, borrowers can easily compare between different loans from different lenders and make a more informed decision about which one will be best for them.
CIBIL score is used by lenders like banks to assess the ability of the individual in paying the money back if borrowed. It is also used by mobile phone or insurance companies to evaluate the individual before giving phone connection and policies respectively. The government organizations also evaluate these scores while recruiting for some higher positions. The credit score provided by CIBIL is called CIBIL Trans Union score.
How to improve CIBIL score
CIBIL score can be improved through different ways like by showing a stable financial history, reducing debts and improving credit rating. The CIBIL score also improve when companies go through bankruptcy proceedings, foreclosures or other debt releases like deeds in lieu of foreclosure.
Here are five quick and easy ways to improve your CIBIL score.
1. Keep track of your credit card balance to avoid late fees.
2. Check your credit score before you start spending money to make sure you can afford it.
3. Stay on top of all your bills & pay them off fully every month, so you don’t get caught by the late fee trap.
4. Avoid paying off balances from one credit card with another credit card, which can hurt your score if you miss a payment on the new one, and charge too much on the old one.
5. Spend only 20% of your credit card limit and pay it off every month for six months.
Some people think that using their credit cards responsibly is enough to maintain a good cibil score, but that’s not true at all!
It is important for an individual to know their CIBIL score as we don’t know when there will be a need of getting a loan. To get the personalized credit score go to the CIBIL website Credit Score page,fill up the form available there and pay the fee of Rs.470 through net banking or credit card using the payment gateway. If the payment is successful, you will be asked 3 to 5 security questions about your existing loans or credit cards.
If you answer correctly for the security questions, your application is approved and you will get the credit score emailed to you within the same day. You will also be provided an username and password for managing your account on CIBIL and you can track all the activities on your credit score like enquiries made on your credit score by companies etc.
How to get better CIBIL score quickly
Banks and financial institutes sanction loans based on the credit score these days.So you should keep your credit score always good.You cannot improve your credit score overnight and it may 1 year or more to build it.
1. Pay all your bills of the credit card and EMIs of the loans on time as late payment will decrease your credit score and it may not create a good impression for the lenders.
2.Make sure your credit card balance is always low. For eg, if the credit card limit is Rs.50,000 and the balance is Rs.10,000 it means you have a debt of Rs.40,0000 which is not good.If you use more of your credit card on a regular basic, it means that you have more unsecured debt which will be a drawback and can prevent the lender to sanction loan to you.
3.Maintain your credit history as a mixed combination of loans and credit cards. If you have only credit cards, it will mean that you are in more debt and the companies may not sanction the loan for you.
4. If you are not using a credit card actively, close the account which will make the lenders think that you have less debts and financially more stable.
5. Keep an eye on joint accounts regularly. If your partner did not maintain payments correctly, it may affect you as well.
6. Don’t become a guarantor for anyone’s debt as their performance will affect your score as well.
7. Don’t inquire too many applications in same time. For eg. Don’t apply for a car loan and personal loan at the same time, which will imply that you are financially unstable.
Benefits of good credit score
8. Make sure the overall outstanding debt is always less than your monthly salary.
Who calculates CIBIL score
CIBIL stands for Credit Information Bureau (India) Limited and was started in the year 2000. It basically collects the details of the individual’s payment to loans and credit cards from the banks and other financial institutions every month.
It then generates the credit information report (CIR) which contains the credit score, personal information and payment history of the individual. The report is then given to the financial institutions for helping them to decide on the loan application of the individual.
Even though CIBIL score is the most popular one, there are also few other companies who calculate the credit score and they are Experian, Equifaxand Highmark who are given license in 2010 to function as credit information company.
How is CIBIL score calculated
The CIBIL Score is produced using an algorithm based on a person’s loan and credit card payback history. When determining your CIBIL score, the following six essential elements are taken into account.
Credit Combination
Maintain a healthy balance of secured (home loans, car loans) and unsecured credit (personal loans, line of credit). It has the potential to improve your CIBIL score.
Ratio of Debt to Income
To increase your credit score, keep your debts, such as credit card payments and mortgages, below 50% of your income. Your credit score will suffer as a result of a greater ratio.
History of Payments
Make sure you don’t get behind on your EMI payments.
Credit use is high.
If you have a large credit card balance, it implies that you have a high repayment load, which can lower your CIBIL Score.
Several Inquiries
Lenders may examine your credit profile with care if you have lately applied for or been authorised for many loans and credit cards, as multiple credit applications represent your debt burden.
Status: Negative
A written-off debt, foreclosure, bankruptcy, or an account in collection owing to missed payments all have an immediate negative impact on your CIBIL score. This informs your potential lender that you are unable to manage your finances, which may make it difficult for them to reclaim their funds.
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So, there you have it.
Improving your CIBIL score is easy but maintaining it is difficult. Make sure you follow good financial habits and improve your CIBIL score gradually. Any suddent jumps can also not look good in the long run.
All the best!
Yes, it asks many private details to get CIBIL score and also sends a lot of spammy emails!
Yes Gijo, you can use any third party app as well, but I’m not entirely sure how secure they are or how your financial profile will be used, possibly exposing it to third parties. I tried one and started getting spam emails from financial products soon after. Hope that isn’t happening in your case.
I thought to enquire CIBIL score requires payment. But this website bankbazaar provided it for free :/