October 10, 2024 · 14 mins read
Santosh Kumar
A CIBIL Score is a specific type of credit score that is exclusive to Indian and Indian citizens. CIBIL generates it – Credit Bureau India Limited, a licensed bureau registered by RBI and one of India's premier credit bureaus. A CIBIL score is like your financial grade card that reflects your financial performance and sheds light on many aspects of your finances, such as creditworthiness, financial responsibility, and management, whether you are a high-risk or low-risk borrower. A CIBIL score of 300 is considered a low score, while a score of 700 and above is considered good.
When we talk about a “score” in any field, it automatically means a number that has been assigned to gauge your performance. Therefore, a CIBIL score works on that same principle in which it shows how much you have scored in terms of your personal finances and where you stand- whether you have aced your performance, whether there is scope for some improvement or whether you have to start from scratch. In the world of finance, a CIBIL score is a reflection of all of that. The score typically ranges from 300- 900, where 300 is the lowest range, and 900 is the highest. A score of 700 is considered to be an excellent score that comes with its own perks and privileges assured by banks and lenders.
How to increase cibil score from 300 to 750? An attempt to raise your CIBIL Score from 300-700 is an ambitious yet achievable task. With a strong groundwork, focus, determination and a consistent approach, you can increase your CIBIL score from 300-700. It requires time, patience, and a deeper understanding of the credit system. Now, let us take a look at the basic fundamentals of how a CIBIL score is calculated so that one can work on these areas and target a rise in your CIBIL score.
Read More:: Minimum CIBIL Score Required for Credit Cards
1. Basics of calculating a CIBIL score: A CIBIL score is essentially like your grade card in school. It is made up of many factors, such as the different subjects that make up your grade card and how much your score in each subject reflects on your overall score. Similarly, various factors dictate the final CIBIL score for an individual. These are the factors that largely dictate your score
2. History of payment: A huge part of your credit score is based on your payment history – this particularly focuses on how timely you make your payments, your repayment reliability, late fees, defaults and everything related to the repayment of debt is factored in. It makes up 35% of the total score and is crucial to building your CIBIL score.
3. Credit Utilisation ratio: next on the list is the equation between your credit limit and how much you have utilised based on your limit. This reflects on your credit managing ability, and it is advised that your utilisation should be below 30% to maintain a good credit score. This makes up for 30% of the entire score and contributes a lot to how high or how low of your score you secure.
4. Duration of Credit History: Another factor that contributes to the score is the length of your credit and loan history. A longer and stable credit history reflects responsible credit behaviour, and lenders categorise you as a low-risk borrower. This contributes to 15% of your overall CIBIL score.
5. Diversity in credit: It is always good to have a diverse mix of credit, as this can have a positive impact on your credit score. Home loans, personal loans, credit card purchases, etc., all will feature positively on the scoring, and a mixture of secured and unsecured loans will contribute to the overall score, which is assigned 10% of the score.
6. Inquiries: 10% of the score is reserved for hard inquiries made recently, mostly three months before the generation of your credit score. Frequent inquiries can have a negative impact on your credit score.
Read More:: What is the minimum credit score needed for a credit card?
With a clear understanding of the calculating methodology of your CIBIL score, it becomes possible to build a better CIBIL score and increase it from 300 to 700. With a clear understanding of the parameters that dictate the final CIBIL score, it is possible to map a route that will lead you to a score of 700 from 300 and possibly even higher. Here is a step-by-step guide that can help you achieve this-
Suggested Download: Download ZET to check your credit score online for free
1. The first step of the process is to have a clear picture of your CIBIL score; knowing the exact score will tell you where to begin and what course of action is to be taken. You can obtain your CIBIL score from the CIBIL website, and that will help you determine where you stand. Check for all the details, including your personal and financial details and discrepancies (if any) and make complete note of all the factors that have affected your score. This will help you focus on the areas in which you need to be more vigilant.
2. The next step is to acquire a credit card (if you do not already possess one). A basic credit card can be the first step towards building and improving your credit score. It can help you manage finances and build a good credit report. If you already own a credit card, then you can simply continue from the next step.
3. The third and most crucial step is to always make timely payments for all of your repayments. Whether you want to do it manually or set up an automatic payment system, this is something that cannot be neglected. Timely payments are a clear marker of your financial management skills and an indicator of a good borrower. You should always prioritise payments and make sure not to incur late fees or defaults, as this negatively impacts your credit score. Being penalised for late payments and defaulting on payments will drastically impact your CIBIL score.
4. Document, track and manage your debts clearly and systematically. You can do this by making a list of your current debts and including all details like balance, interest rate and due dates. After this, you can adopt a repayment strategy that best fits your requirements. You can either focus on completing small loans at first and move on to larger amounts or vice versa by paying off the bigger loans first and then moving on to the smaller ones. Either way, you must adopt a concise strategy to maximise your resources while paying off debt.
5. Limit your credit utilisation to a minimum so that your credit utilisation ratio is well balanced below 30% or less. If it is possible, always aim to spend on what is necessary and not overshoot your credit limit. If possible, you can negotiate with your issuer for a higher credit limit, which will allow you more room for expenses if required. You can also apply for an additional credit card to expand your credit limit; however, make sure to check the terms and conditions and opt for something with less maintenance and lesser interest rates so as not to hamper your credit score.
6. Try to leave a positive credit trail by keeping old accounts open. The duration of your account will figure positively in building your CIBIL score. You can keep them functioning by using them from time to time, making small purchases, and paying them off in time. Having a functioning account will help you establish a longer and more faithful relationship with the bank or lender and will ensure that you are recognised as a long-time client.
7. Try to limit your credit inquiries to a minimum so that they do not imply that you are in financial trouble or a high-risk borrower. Making multiple hard inquiries in a short amount of time can have very negative implications, so it is better to limit inquiries as much as possible unless it is an absolute requirement.
8. Always make sure to monitor every activity of your credit account closely. Be it transactions that you have made, your loans, purchase history, repayments, late fees, defaults or any irregular activities like unauthorised transactions, additional fees, etc., always keep a close watch on these things to make the most of your credit card and avoid things that may jeopardise your CIBIL score.
9. Learn how to manage credit. Do not let the credit card dictate your expenses, and only make purchases or payments according to your needs. Avoid accumulating unnecessary credit, and make sure to consolidate loan-based shopping in one go to minimise multiple small expenses.
10. Always be cautious about your credit card activities, and do not hesitate to seek professional support if you feel that your credit rating is under threat. Problem-solving and risk management are great ways to avoid a negative score.
After getting above 700, your next goal is to stabilize it and target a score of 750 to 800, as you want to be in this range for the lowest interest rates and improved chances of loan eligibility.
To improve your CIBIL Score further:
1: Make on-time payments for at least twelve months
2: Keep utilization less than 20% Keep a good mix of secured and unsecured credit
3: Do not close your oldest credit card as credit age contributes towards your score
4: Minimize hard enquiries and only apply for credit when necessary
If you continue to behave consistently with your credit, a score over 750 is achievable within 6–12 months.
The process of increasing from 300 to 700 typically takes on average 12-18 months. At the same time, different ranges allow you to see your progression.
300-500: High-Risk Period You want to focus on managing collections and avoiding further delays. Early benefit comes through fixing errors on your credit report.
500-650: Recovery Phase Once you reach about 6-9 months of timely payment and low utilization of credit, you can expect your score to start increasing regularly. Some lenders may issue secured or higher interest loans.
650-700: Low-Risk Phase As you attempt to reach 700, continuous payment effect, and limited credit usage come into play. This period has slower increases because only time in good standing is rewarded.
After you reach 700, lenders will determine you as a more stable borrower; however, you need to reach an even higher level (750) to receive the best interest rates.
Make sure to download your full credit report and see if there are mistakes, like errors in loan listings, codes for lost or stolen or closed accounts. Your report might even have incorrect overdue payments or be reporting on closed accounts. These mistakes can be corrected through a dispute and give your score an instant boost.
Open credit card bills or delayed EMI payments can do catastrophic damage to your score. Even if unpaid bills are not reported to the credit agency, they are deducted from your score. The moment you pay off delinquent bills, you show the world your financing has resolved and your risk score goes down.
A massive piece of your score is payment history. Ensure every installment and every bill is paid on or before the due date. This may seem easy, but the moment something is late, your improvement will grind to a halt.
Using only 20-30% of your credit limit is sufficient to look financially stable. If you have been using too much credit, lower your card use.
If you make multiple loan applications, hardest inquiries will occur against your report, moving your score down even further. Simply do not take any new loans or cards for a minimum of 90 days after getting the score above your lowest rank.
Consider starting with a secured credit card or have someone who is a responsible borrower add you as an authorized user. This will slowly start to rebuild your credit profile.
By following these steps, you will be able to gradually build your score from 300 to 700 and even higher if you wish to. Achieving a score of 700 will open many doors of opportunities for an individual and allow you financial freedom where you do not have to question and rethink making small or big financial decisions. A score of 700 from a score of 300 will be a journey worth taking because of the perks and privileges that come with a higher CIBIL score. It will grant you access to better cards, better deals, better rewards and a higher credit limit to spend from. A CIBIL score of 700 allows you flexibility and negotiating ability, and you can negotiate for better deals, better rates, and a larger credit allowance. A score of 700 is an achievement in terms of personal finance, and many people strive to achieve it. It is not an easy feat to build such a credit profile, but it is achievable with perseverance and dedicated financial planning. Through the support of a good CIBIL score, you will be able to explore new possibilities and achieve new heights of success both in the professional and personal spheres.
Read More:: Best Credit Card for Beginners
Increasing your CIBIL score from 300 to 700 with proper planning and a gradual building of good credit behaviour is possible.
Having a CIBIL score of 700 translates to creditworthiness, which means lenders view you as a low-risk borrower and are more willing to approve loans, give you better credit card offers, and offer a higher borrowing limit.
Yes, a CIBIL score of 300, which is among the lowest in the range, is considered a weak score with very high-risk credit credibility.
Yes, a CIBIL score is one of the parameters that banks and lenders consider while approving loans. A higher CIBIL score will ensure a better chance of approval and a higher loan limit.
Yes, increasing your CIBIL score from low to high with various techniques that require financial management and planning is possible.
On average it takes most people at least 12 – 18 months of consistent payments and low overall credit usage to exceed a score of 700.
Check your report for both incorrect information and outstanding account payments. Make timely payments and limit the amount of credit utilized.
Yes, you can if you already have open lines of credit. If not, getting a secured card may help elevate your credit score.
Keep making payments on time, maintain low usage, avoid applying for excessive new lines of credit, and keep long-term accounts in good standing.
Build and Maintain a 750+ Credit Score
