December 4, 2024 · 11 mins read
Santosh Kumar
Your CIBIL score goes way beyond being a mere number; it's more of a measure for checking your financial health as well as your creditworthiness. Lenders, banks, and even landlords would like to use this score before approving your application, loan, credit card, or rental agreement. A good score simplifies life, providing a view of all the smooth money-making opportunities, while a low score puts up closed doors in your face. But what happens when you're making every effort but still face the question.
The frustration of being stuck on a stagnant CIBIL score is prevalent among numerous borrowers, especially for those who aim to achieve financial stability after errors in the past. Let's look into the factors that contribute to your poor CIBIL score with reasons for not improving despite proper efforts from your side, and further discuss effective yet practical steps to take that score up finally.
Your CIBIL score is calculated on the basis of your credit history and financial behaviour. The score ranges from 300 to 900. It gives lenders a quick snapshot of your ability to handle debt. A good score increases your chances of getting approved for loans or credit cards and gives you access to better interest rates, higher credit limits, and faster approval processes. Conversely, a low score may have loan rejections or unfriendly terms. However, even after careful discipline, improving the score may take considerable time. In order to really improve creditworthiness, it is necessary to know why the score has not been moving.
Improvement in the CIBIL score is not overnight work but requires discipline, patience, and consistent effort. Most importantly, you need to know that changes are not overnight; credit bureaus depend on data updates from lenders, and it might take weeks or months for change. Here are some practical ways explained in detail on how you can improve your score effectively:
Your payment history forms the bedrock of your credit profile, accounting for 35% of your score. Timely loan or credit card payments reflect your dependability and commitment to servicing financial obligations. Missing just one EMI or credit card bill can bring your score down sharply.
1. Connect Your Checking Account with Auto-pay: Auto-payment linkage using a connected checking account ensures timely payment processing. The only caution is to ensure the account balance does not dwindle below the amount earmarked to avoid transaction failures or overdraft charges.
2. Track Your Due Dates: Use mobile apps or reminders to stay updated on payment deadlines. Many personal finance apps categorize your bills and send alerts ahead of time.
3. Pay the Total Due: This option is used in lieu of paying the minimum on credit cards. It avoids late charges and increases the interest burden, but it might have a detrimental effect on your score over time.
For example, Priya was a working lady whose CIBIL score was bad due to habitual delayed payments. She raised it from 640 to 720 within one year by enrolling in auto-payments and maintaining a buffer in her bank account for unexpected eventualities.
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The credit utilization ratio reflects the percentage of your total credit limit that you’re using. Keeping this ratio below 30% is vital for a good score, as high utilization indicates dependence on credit, which lenders view as risky.
1. Distributing Spending Between Cards: Avoid using one card excessively. Use multiple cards to distribute your spending so that each card is used less frequently and the overall spending is still in control.
2. Pay Balances More Often If your balance is close to the 30% threshold, pay mid-cycle to lower your balance before your billing statement is prepared. This prevents the high ratio from being reported to the credit bureau.
3. Request a Credit Limit Increase: If you’re confident about managing your finances, ask your lender for a higher credit limit. For instance, if your limit increases from ₹50,000 to ₹1,00,000 and your spending remains steady at ₹20,000, your utilization drops from 40% to 20%.
Example: Rahul carried 80% of his credit card limit every month, which was a stopper to his score's upward trajectory. He increased his credit limit and began paying balances bi-weekly, bringing utilization down to 25%, and this helped his score go up by 50 points in six months.
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Lenders prefer credit borrowers who can responsibly manage both their secured and unsecured debts. Secured credit includes products whose repayment is secured by something of value, such as homes or vehicles. Unsecured credit includes products such as credit cards or personal loans. Management of all credit types attests to flexibility, assuming less perceived risk.
1. Avoid Over-Reliance on One Type: If you’ve only used credit cards, consider taking a small secured loan to add variety to your profile. Conversely, if you’ve only dealt with secured loans, using a credit card wisely can help.
2. Manage the loans strategically: Do not take too many loans just to diversify. Instead, concentrate on manageable amounts that are within your repayment capacity.
Example: Kavita's credit history only included personal loans. However, she had a secured gold loan, and responsibly using a credit card meant that she had diversified her credit mix; over one year, she went from a score of 700 to 770.
Errors on your credit report silently destroy your score. These include errors in your personal information, outdated loan status that needs to be updated, or fraudulent entries. This is the way through which your credit history becomes correct and up-to-date.
1. Get Your Report Annually: CIBIL offers one free credit report per year. Download it and check for personal details, account statuses, or payment history discrepancies.
2. Check Errors Now: When errors are present, dispute them with the credit bureau. Attach receipts of payment or loan closure certificates for easier facilitation.
Example: Ajay saw a closed loan still showing as active on his report, pulling down his score. He corrected the problem by filing a dispute and submitting evidence, which pushed the score 40 points upward.
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High outstanding debt or multiple running loans could indicate financial stress and the score remains stagnant. Try to reduce your debt-to-income ratio; it calculates the percentage of money spent on debt repayment each month.
1. Consolidate Debts: If you have several high-interest loans, consolidate them into one loan at a lower interest rate. This will simplify the repayment and lessen your monthly burden. The smallest you pay off first would surely get a psychological boost, especially since all the money currently available can beat bigger obligations.
2. Negotiate Repayment Plans: If you're struggling to keep up, approach your lender for revised terms. Demonstrating intent to repay—even through smaller instalments—positively impacts your score over time.
For example, Ramesh had three active loans that consumed 60% of his income. He merged them and reduced the EMIs, which reduced the debt-to-income ratio and improved his CIBIL score slowly and steadily.
Each time you apply for credit or a loan, the lender runs a hard credit inquiry on your report that temporarily lowers your score. Strung together over a short space of time, multiple inquiries make you seem credit-hungry.
1. Space Out Applications: Plan your credit needs well in advance and apply for new products only when necessary. Avoid impulsive applications based on promotion offers.
2. Pre-Check Eligibility: Apply tools with pre-approved or soft inquiry-based checks to measure your chances of getting approved without touching your credit score.
Example: Meera's score did not change for months because she had repeated credit card applications. Six months later, after extensive research, she applied only for one card, reducing her hard inquiries.
Improvement in your CIBIL score can be done by continuous efforts, patience, and knowing what exactly hampers it. Here's a very concise guide on how to increase your credit score effectively-
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Payment history has an important impact on your CIBIL score. Payment history counts for 35% of the calculation. A single EMI delay or credit card late payment can ruin your score. To avoid this:
1. Enlist auto-debit for bill payments and loan EMIs.
2. Keep track of due dates by reminders or financial apps.
3. Pay off the full amount owed to avoid minimum payments.
A good credit utilization ratio, the percentage of the credit limit you are utilizing, should be under 30%. High utilization is a red flag for credit dependency. You can handle this situation in the following ways:
1. Make sure to pay the balances before the end of the billing cycle.
2. Divide expenses across multiple credit cards.
3. Ask for a higher credit limit with stable spending.
A combination of secured credit, such as home loans, and unsecured credit, like credit cards, shows that you can manage different types of credit responsibly. If you're too dependent on one type, you may want to diversify to enhance your credit profile.
Errors such as outdated account statuses or unauthorized loans will decrease your score. Make sure to review your credit report at least annually for inaccuracies and dispute them. Correcting them will significantly improve your score.
Every new credit application results in a hard inquiry that slightly lowers your score. Avoid this by researching eligibility beforehand and spreading out loan and card applications.
It always takes a while to make credit. Commit to disciplined finances, for example, prompt payment and using credit responsibly, and be on the right path for positive, steady development.
Being diligent in such steps yields gradual but meaningfully increased CIBIL scores to open wider financial opportunities.
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Making the standing CIBIL score change, which appears difficult, can be managed on your own with a little understanding of the reasons and intentional efforts. Causes behind stagnation of a person's CIBIL score may include high levels of credit utilization, paying some bills late, multiple hard inquiries in your credit report, or mistakes in your credit file. All these require endurance with regularity and a gradual plan.
Pay all your loans and credit card accounts on time. Payment history is the most important factor influencing your credit score. Spread your expenses across different cards or ask for a credit limit increase to keep your credit utilization ratio below 30%. Always check your credit report for errors and dispute errors immediately to ensure that your score reflects your real-life behaviour. Applying for too much credit too often: More hard inquiries will further delay your progress.
Remind yourself that upgrading your CIBIL score is more about sustainable habit-building. Be it responsible financial discipline, a more diversified mix of credits, or an orderly debt elimination process – each step pays off when taken in earnest. Be constant and informed enough to derive all the positive implications and advantages resulting from increased credit scores: increased loan eligibility chances, reduced interest rates and other financial guarantees.
1. Why does my CIBIL score take so much time to improve?
Whatever changes lenders report regarding your data are updated every 30-45 days. Positive changes in your credit scores may take several months to appear.
2. Will my score suffer from credit card use?
No, using a credit card responsibly improves your score. To see positive effects, ensure timely payments and maintain a low credit utilization ratio.
3. What if I close some old credit accounts?
Closing old accounts shortens your credit history, which could lower your score. Instead, keep older accounts alive by using them sometimes.
4. How can I gain more points rapidly?
As if overnight, corrections of credit-related errors, reduced credit utilization levels, and resolving outstanding loans can expedite the changes.
5. Will co-signing a loan affect my score?
Yes. If the primary borrower fails to make payments, this impacts your credit score as a co-signer, so be careful before agreeing to co-sign.
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