8 tips to Improve CIBIL Score !

Is your CIBIL report and Score messed up ? Then the biggest question you must be having is “How to Improve CIBIL Score ?”. “Bad credit score” is really a scary phrase these days. Many people are stuck with a bad credit score/report due to their own or credit card company mistakes, but most of the times I see that it happens due to poor credit behaviour and mis-management of credit officers. Everyone wants to improve cibil score, so that they do not face any issue in getting loans at some point in future. Now in this article, I will highlight few tips/points which will help you understand what makes a great credit report and good credit score. To understand this, just be clear that your credit score is dependent on several things and taking care of each point is very important. Read in detail about CIBIL Score here

1. Late payment / missed payments

The biggest reason for a bad credit score is bad loan repayment history. A lot of people pay their bills late or miss the payment completely. It’s so tempting to pay the minimum balance now and pay the balancing due later. Doing this just saves you from late payment fees, that’s all. The interest is charged and more than that you should be worried because this information is updated by your bank to CIBIL and the next thing is obvious, your credit report and score gets uglier each month because of this. So every time you miss your home loan EMI, car loan EMI, credit card payment or you make a late payment, it affects your score badly. If you have done a lot of late payments or missed payments earlier, its your time to fix it by being more disciplined from now on. Dont worry, if you now promise to pay things on time and do it regularly for next 1-2 yrs, it will surely improve cibil score for you.

Common sense Tip: Don’t pay your bills through cheque just 1 day before the last due date, because it does not mean that your payment is done. Some one will collect it, send it somewhere, then some one will make an entry for it etc, etc… This can take some time and result in delayed payment. Why not drop it 5 days earlier instead of 1 day? Please automate the payments for EMI’s and your bills. If the bills are not fixed each month, at least put a recurring reminder in your phone 5 days before the last date and then make the payment. If I can do this, why can’t you? In last 4 yrs, I have made my FULL credit card payment 48 times exactly 4-10 days earlier than the last date of payment. My CIBIL score is 831. You can also check your CIBIL score online

2. Large Number of credit cards and loans

There was a time when having 6-8 credit cards was a commonly practiced trend and something to show off, now you will pay for it! A lot of credit cards and loans above a “natural” limit is a big negative thing. That shows credit hunger and an extreme dependence on credit in your life. It shows that your life is too much dependent on external credit. Lets say you have two friends Ajay and Robert. Ajay asks for some credit from 2 people in whole year and then asks you for another Rs X and you have good friendship with him, I am sure you will think once and then may be give the money to him. But on the other hand imagine Robert who has taken a credit from 8 people in your office and 2 other people outside office, then when he comes to you and asks for even Rs X/2 amount, you will think 5-10 times before giving it to him. What kind of feelings you will be having in mind? What all doubts will be there in your mind? Some thing same happens in the loan industry, if you have more than “required” or acceptable limit of credits, it badly affects your score. Your score reduces point by point each month.

Common sense tip: If you have a lot of credit cards, better increase the limit of 2-3 of them and close the other credit cards. This way you will have same Credit limit in total and have reduced number of cards. Its better to have 2 cards with 25,000 limit each, than 5 credit cards with 10,000 limit each.

3. Utilizing your full Credit Limit each month

One of the easiest way to improve cibil score is to effectively use your credit card and do not utilize it fully to the limit. If your credit card limit is Rs 50,000 a month and every month you use 40,000 or 45,000, it will affect your score in bad way. Even if you are paying your dues on time, still what it shows is that you are utilizing your limit to fullest, companies don’t know that you might be doing it deliberately to “manage” your credit effectively, but the way it is seen is that your life is dependent on credit. So stop reaching 80% or 90% of your credit limit. A 30%-40% credit utilization is well accepted and seen as “positive” and make sure its the case with all the credit cards you have.

If you have 2 credit cards with limit of Rs 10,000 in first card and Rs 10,000 in second card and you spend Rs 9,000 from first credit card, but Rs 0 from second credit card, then your 1 st credit card utilization is 90% & 0% in second. Which means that you are seen negatively on your first credit card and “positively” on second card, but what you can do is spend 5,000 from first card and Rs 4,000 from second card, so that your credit utilization is 50% and 40% on both the cards and its “positive” on both.

Common sense tip: If you are reaching your limit, either make sure you move to cash/debit card for a part of your expenses and reduce your credit card limit, but in case you can not reduce your expenses on credit card, better call your credit card customer care or write to them that you want your limit to be increased. Most of the companies will do it. Just tell that you have few things lined up in next 2-3 months and you want the limit to be increased.

On the other hand think well before closing a credit card that you are not using. Your over all credit limit will come down if you close a credit card. So make sure you think twice before closing a credit card from credit utilization ratio point of view.

4. Higher percentage of Unsecured credit

A high number/amount of unsecured credit is bad. Unsecured credit here means credit card debt and personal loan debt, which are totally unsecured and you can run away with it. If you have total 1,00,000 worth of debt and out of that 80,000 is because of credit card and personal loan, then 80% of your debt is Unsecured. This is bad. If you had 80% of Secured debt like education/home/auto loan, then it was a different thing. I believe this is very obvious, the more unsecured debt you have, the bad it looks like. It shows that your life has more “emergencies” than a normal person, which makes you hungry for immediate credit. So this makes sure your credit score takes a hit. Remember that having a good mix of credit types is a good idea. So if you have home loan, education loan and credit card, that’s 3 types of loans, which is good. But if you have 5 personal loans and that’s all, it shows too much dependence on one kind of loan.

Common sense tip: Make sure your total unsecured debt, looks small in front of your total debt. You if have 80,000 of unsecured debt out of total debt of 1,00,000, then your unsecured debt ratio is 80%. If you take 5 lacs of secured loan, then your unsecured debt comes down in percentage, that makes things look better. Or make sure you prepay a part of your unsecured debt and bring down the percentage, Its one of the ways to improve cibil score !

5. Being a guarantor without giving a thought

If I take a home loan and ask you to be a guarantor for my home loan because I have helped you with so many things in personal finance, because I have answered so many of your comments and helped in solving your queries, what would you say? Don’t think more on this, you better say “Go to hell”. Because if I default on that home loan, you are held liable and your score will go down. While my score will be affected more, yours will also take a good hit! A lot of people because of various reasons become guarantor for other’s loan and then the primary person runs away or is unable to pay off the loan. Don’t do it, unless you are really sure you want to do it. I can do it for my brother, but not for you.

Common sense tip: Don’t leave your documents here and there, if you don’t agree to become a guarantor, many people try to make you guarantor by forging documents and misusing xerox PAN card or driving licence. Signature is easy to copy these days! Also when your friend who has spent good time with you in last 3 months, asks you to become a guarantor, tell him you were thinking of asking him to be guarantor for your home loan, good way to test the friendship!

6. Duration of your credit history – more is better

Longer the history, better it is. You will trust a 5 yrs old friend more than 3 months old one. That’s true in case of credit history too. If you are paying your payments/EMI’s for all loans on time from last 5 yrs, it’s very much a proof that you pay on time, you have a good history, but if I have a good history from last 5 months, that is not that strong. So higher the duration of good payment history, the better your score will be and will help you to increase cibil score.

Common sense tip: If you do not have a credit card, there is a good reason why you should get one now and do your payments with credit card and pay in full every month, so that your payment history is built.

7. Too many inquiries in short spam of time

Making too many inquiries in a very short time is not looked at positively. Imagine you have made a credit card inquiry, a personal loan inquiry, a car loan inquiry in last 3 months itself. What does it show? It shows credit hunger, it shows that you want to snatch any credit which you can get, you want to get things in life on credit. Hence have a respectable amount of gap between each inquiry you do. Dont apply for home loan with 6 banks. Note that each and every inquiry you do is reported in your credit report and if your report is full of inquiries, your score will stink! Any lender will doubt your payment capacity when you are so much dependent on credit. So the best way to improve cibil score is to keep your enquiries minimum.

Common sense tip: A lot of people just apply for loans even if they really don’t need it, keep this thing in mind and deliberately make sure that there is few months of gap between 2 loan applications (at least 6 months gap would really be good).

8. Settlement of your Loan Or running away

This is the worst mistakes of all. There are people who first take on a lot many loans and then are unable to pay it. So they either ran away (companies mark it as “write-off”) or at best just made some payment and settled the loan (companies mark it as “settled”). And this will make sure you are blacklisted for at least 7 yrs. You will not be given any loan, you can cry your eyes out for that 1 small credit card and you will be treated like you are nothing.

Common sense tip: Cut your debt, when it shows a sign of going out of control. One common ground rule which can be followed it that the overall outstanding credit at any point of time should not be more than 1 month of your take home salary. There is no solution of an out of control credit card debt other than paying it in FULL. Live a life with credit card as if you don’t have one!

Each tip on How to Improve CIBIL Score has its own weightage

Note that different factors which affect your credit score has its own weightage, so one factor can be more stronger than the other, but make sure you follow all the best practices and do not make any wrong decision. Look at your actions from the lender point of you. See what kind of people you would like to give credit if you were the loan provider. Just act like what you had expected

Did you understand how you can improve cibil score ? Can you share some top to increase your credit score , incase its not covered in this article !

1,216 CommentsAdd Comment

  1. Sunny


    I took a personal loan in 2009 and was repaying the EMI for a year, later due to some problems wasn’t able to pay and forgot that I took a loan. Later in 2012 I took a personal loan, vehicle loan and I closed it on time. I have been using credit card since 2013 and have been paying the outstanding dues on time.
    Recently I have been applying for personal loan and credit card and all my personal loan & credit card applications were getting rejected and I wasn’t knowing the reason for rejection and requested for the CIBIL report and found that the loan which I took way back in 2009 is Over due and is in Suit Filed/Written off status I guess. I called the bank and they informed that I need to the overdue amount and interest and the same will reflect in CIBIL report after 3 months. I just wanted to check if I repay amount what will be the status of my loan. Will it be Settled or Closed status and once its done how long does it take to be a good customer so that I can apply for personal loan.

    Any advise on the same will be very helpful.


  2. Arun

    Hi Manish, I had applied for a credit card. And it is rejected due to insufficient sibil credit history.
    While my college times, i helped my friend for getting a loan for him by my account. He didn’t pay on time. My 8 Cheques was bounced.. The loan was fully paid.

    Now i have no any loan. Now I can’t get any loan, credit card etc.. How can i improve my score on Sibil?

  3. Madhusudana

    Dear sir
    I have taken 90000 thousand education loan not paid from last year but I have paid full due amount now my score is 655 after update Cibil how much score increase tell me sir

  4. Simbu


    I have a taken a Education loan in 2007 from SBI Bank 30,000 and i Paid fully(late payment) and also I ICICI Credit
    card, I have been making minimum payments on my credit card for the past 6 months on which the overall outstanding was always 80% above the credit limit. After coming across this article, I have decided to pay off the full outstanding by next month.

    Now applied AXIS bank and CITI Bank Credit card, both of them declined because Poor CIBIL score,…

    How to improve my CIBIL score?? please do needful..

  5. Srikanth

    Hi Manish,

    I took a consumer loan from ICICI and cleared it without any dues in 12 months and CC from HSBC in the year 2008 and closed it in 2010 without any outstanding dues. After that, I have taken personal loan and credit card from ICICI and after 10 months i was unable to pay due to financial crises and settled PL in Aug-2013 and CC in Apr-2015. Now, my current CIBIL score is 589. Now, to improve my CIBIL score I took an instant CC against an FD of 20k frm ICICI with a CC credit limit of 17k and using it regularly for an amt of 3k per month and paying the Total amount within the due dates. I just want to know, approximately how long will it take to increase my CIBIL score to 750 ? Do I have to spend more or increase the credit limit to improve the score early ?

    Your inputs will be highly appreciable.

  6. I had a CC with a leading back for a year – never missed any emi or any oustanding amount. The next year the bank informed me that the renewal feel is 5000 which i never knew as teh CSR never informed me about this neither its writen anywhere. So i paid the renewal amount and closed the CC as i do not intent to keep paying this huge amount every year. Will this affect my CIBIL score?

  7. MOhammed


    I have taken an educational loan 7 years back & settled it only 2 years back. Now I have applied for a Credit card from private Bank. Will that affect my CIBIL Score ?

    Also I want to know, not maintaining min balance in saving account affects the CIBIL Score?

  8. vivek

    Hi Manish,

    My Credit Score suddenly dropped to 702 from 800 in 5 months. I have unknowingly enquired about consumer durable loans from Bajaj finance for my Friends. The total no of loan enquired we around 4 in last 5 months. Remaining things are fine. How can i improve my credit scroe as i have to apply for a home loan soon.

    Current Situation:
    1. Car loan – 3 Years old
    2. Consumer Durable Loan – About to end in 5 months (should i close it now??)
    3. Credit card Utilisation is almost 80% in one card and 0% in other card.

    Please help..

  9. prashant

    Hi Manish

    I had some credit cards 10years back when i started earning, Due to some financial probs i was not able to pay. Now I have settled all the cards. In 2011 i took auto loan which i paid in 3years without and delay or bounce. Now I do not owe anything to any bank or any financial institution nor i have any loan to pay. My credit score is 587, Now i do not know how do i increase my score as i do not have any loan or credit card to pay. My financial position is very good and I have earning of 3 lakhs per month. Please help

    • YOu said that you settled the loans . Which means that you did not pay the full amount, you owe that to companies still and now the amounts must have become become with interest !

  10. Ravi

    HI Manish,

    Thanks for your other replies.

    I have taken educational loans and there was some late payments also credit card late payment…but in Dec 2014 I have cleared all my debts and still using same credit card ..in Jan 2015 I got HDFC car loan now its being 6 months…but even now my CC score remains same 618 only…so not able to get PL loans .

    • Yes, it might happen that you dont get personal loans due to lower score ! . You cant do much other than keep using the other loans and make payments on time to take your score to high level

  11. Shiv kumar

    My cibil score is only 550 because my three personal loan is settled and other write off how can I improve my cobil score

  12. Ashish

    Hi, wonderful updates & really an eyeopener.. However, I once spoke to a Branch manager of a Pvt. bank & he stated that to improve your “bad” CIBIL scores, is to take about 20K (or more) to the bank & apply for a credit card within that limit (say 10K). Use the card every month to pay your utilities / groceries ect. & pay back in full before the due date. Preferably online! Say your bills amount to approx 5K each month, use your credit card to pay / purchase & pay back accordingly. This regular on-time payment will earn you 80 good & positive points each year! Another couple of people (from the financial field) also advised me that if there are some bad loans (defaults) it is better to pay up in full OR “settle” it out with the bank / financial company! BUT not to keep it outstanding & on default. Close it anyhow! Hope my inputs help. Request the Mr. Manish to may correct me if the above info is wrong or misleading.. Thanks!

  13. Anand

    Hi I had 2 PL and 3 CC which I was paying promptly till 2008 September. After the slowdown in the market, I coul not pay for 2 years. I later started settling my accounts by paying off a minimum amount decided by the bank/ collection agencies. I cleared all the accounts in September 2014. In December, I enquired for my CIBIL score which was 625. Now I would like to know whether I would be eligible for a new CC or PL? if not then by when and also when will my CIBIL score be 700 or more?

  14. Surya

    Hi Manish,
    i have a taken a loan in 2012 from Axis Bank 4L and i paid 10 EMI’s after due to the financial problems i have not paid till now.recently got a call from Axis Bank Loan Collection Team and asked me to pay remaining amount either by settlement or to clear total outstanding amount if not pay will take legal action according to the section 138.
    now my cibil score is 650.please suggest me how can i proceed in this case also to improve my cibil score. need minimum 6 months time to pay either settled amount or to clear total outstanding amount.

  15. Keerthan

    Hi, I have been making minimum payments on my credit card for the past 1 yr on which the overall outstanding was always 90% above the credit limit. After coming across this article, I have decided to pay off the full outstanding by next month. If I close the credit card or discontinue its usage completely, will my credit score improve? Or do I have to continue using the card in a disciplined manner to improve my score?
    I have only one credit card, no other loans, I have never missed a payment of the credit card bill/insurance premium.

  16. vibin

    Hello All, I had a Citibank suvidha Corp Salary account , While Opening the bank had also opened a ready credit account where the account number for both was same.I used this Account for a Year, and could not close and left the country in 2006. To my surprise i pulled my CIBIL Report and saw the same Account number mentioned as closed and says 0 amount with written off status. When i checked with the Citibank, they says from their back end team they are able to see an amount of 54600 Rupees as OD and they have done a reversal. so to close this account and change the status they are asking me to pay the amount which is mentioned above.To my knowledge i have used only the amount which was getting credited to my salary account , nothing else apart from it. Can you help me how to get rid of this please…and keep my CIBIL always Good. Trust me i never took or used OD facility from this bank, and the bank is claiming that this amount i need to pay…any help would be greatly appreciated.

  17. ESAB

    am using ICICI Credit card 7 years back, after my relocation i come to knew that there is an payment due, in which i not paid, later wise in 2010 when i do some transaction to my savings account , it will debit automatically to credit card , and still they are saying some 12k pending
    now my auto loan got rejected due to this, now i want to understand that if i paid the amount to concern back, did my cibil get cleared
    as how can i come to knew am in black list or not


    • Its not that simple. Its not that just because you clear the old thing , the same moment you will get the new loan . First clear your old loan, and after 6 months apply for new loan if you want

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