Good CIBIL Score – Benefits and Ways to Improve

CIBIL score displays your creditworthiness depending on your past credit behaviour. A good CIBIL score helps lenders assess the risk of providing you credit in the credit approval process. Usually, a CIBIL score of 750 or above makes it convenient for the applicant to avail a new loan or credit card.

A high CIBIL score indicates responsible credit behaviour and higher creditworthiness which further enhances the chances of loan or credit card approval. Read on to learn what is a good CIBIL score, top benefits of maintaining a high CIBIL score, what affects your CIBIL score, how to build or improve your CIBIL score, and more.

Understanding CIBIL Score

CIBIL score is a three-digit numeric summary of your credit history that ranges between 300 and 900. A score above 750 is generally considered a good CIBIL score. A good/high credit score may help you avail credit more easily and on better terms as it indicates a lower degree of risk for the lender.

However, CIBIL score is just one of the credit scores generated by TransUnion CIBIL and your credit score may vary among different credit bureaus. Moreover, different lenders may consider a different credit score such as the one generated by Equifax, Experian, or CRIF Highmark when evaluating your credit application.

Importance of a Good CIBIL Score

A credit score is one of the major determinants that help lenders gauge your creditworthiness based on your past credit behaviour. A good credit score indicates a higher creditworthiness and a lower degree of risk for the lender.

Hence, a high credit score usually comes with the following key benefits for the applicant:

• Higher chances of approval: A high credit score indicates responsible credit behaviour, and a lower risk of default for the lender which typically increases your chances of being approved for a loan or a credit card
• Lower interest rates: A good credit score may also help you avail credit like a personal loan, home loan, or credit card on comparatively lower rates of interest from the lender
• Increased access to pre-approved loans: A high credit score may also often increase your chances of accessing pre-approved loans and credit card offers. These offers can give you quicker access to credit as they usually involve minimal documentation and shorter approval times
• Easier access to premium credit cards: Before approving a credit card application, one of the first things that lenders consider is the credit score of the applicant. As a result, credit card companies are more inclined to provide such applicants access to premium credit cards if they fulfill other requirements that feature better rewards in the form of reward points, cashback, privileged services, etc.
• Approval for higher loan amount/credit card limit: A high credit score can also increase your chances of getting higher limits on your loans and credit cards approved. This is because a higher score usually indicates a lower risk of default owing to your responsible credit behaviour
• Possibility of approval for longer tenure loans: A longer tenure usually involves a higher degree of risk for the lender. However, a good credit score may help you avail longer repayment tenure on your loan than those with a lower score. When a loan is repaid over a long period, it results in smaller EMIs, a lower monthly credit burden, and may help you manage your monthly expenses in a better way.

Also Read: How to Check your Credit Report Online

Factors that Affect Your Credit Score

Here are a few key factors that influence your credit score:

• Repayment history: Your credit repayment history is one of the most important factors that affect your credit score. Timely payment of debts and credit card EMIs shows a good repayment capacity and thus, can help build up your credit score. Whereas, lagging on your repayments, debt settlement, etc. shows the inability to handle credit efficiently and can affect your credit score adversely
• Errors in credit report: Errors in your CIBIL credit report such as incorrect mention of defaults in repayments, errors in active loans or credit cards, or even errors in personal information can adversely affect your CIBIL score. You must check your credit report regularly and raise a CIBIL dispute to rectify errors, if any, at the earliest
• Multiple loan inquiries/applications: Making too many loan applications/inquiries with multiple lenders within a short period can hurt your credit score as it indicates a dire want for credit. It can also increase the number of hard inquiries by multiple lenders on your credit report which can adversely affect your credit score

Additionally, some other factors that can influence your credit score include:

• Credit utilization ratio: It is the ratio of the amount of credit availed to your total available credit limit. A high credit utilization ratio may indicate a higher dependence on credit, a higher repayment burden in the future, and thus, a lower creditworthiness. Whereas, a lower credit utilization ratio hints at the opposite
• Credit mix: A balanced mix of secured and unsecured credit can have a favourable impact on your credit score. It indicates your ability to manage credit across loan types and lending institutions effectively and can have a favourable impact on your credit score. However, no lender will reject your application just because you haven’t handled multiple forms of credit in the past
• Length of credit history: The length of credit history or credit age is another important factor that affects your credit score. Having a long credit history with good borrowing and a clean repayment track record usually indicates responsible credit management and a history of financial stability which has a favourable impact on your credit score

Tips to Improve Your CIBIL Score

Several factors impact your credit score, including your repayment history, credit mix, credit utilization ratio, age of credit history, etc. Following are a few key ways that can help you improve your credit score: 

• Maintain a clean repayment track record: Pay your credit card dues and loan EMIs in full and on time. Late payments and missed payments can adversely affect your score. Ensuring timely repayment of debts over a longer period can positively impact your credit score as it indicates responsible credit behaviour over time
• Avoid multiple simultaneous loan inquiries/applications: Avoid making multiple loan applications and inquiries with several lenders within a short period. It shows you to be credit-hungry and also increases the number of hard inquiries on your credit report which may adversely affect your score
• Regularly checking your credit report for errors: Regularly check your credit report for administrative and other errors. These must be reported and rectified promptly using the prescribed dispute resolution procedure. This may help you increase your credit score which may have fallen due to incorrect data
• Avoid settling your debts: You should always try and pay off your debts in full and opt for a settlement only as a last resort. Though settling your debt may reduce the burden of debt, it indicates an inability to repay your debts and may thereby negatively impact your credit score and chances of credit approval in the future
• Maintain a low credit utilization ratio: Maintaining a low credit utilization ratio indicates lower dependence on credit, a lower repayment burden, and thus, higher creditworthiness.  Requesting credit card providers to increase the credit limit on your card is one of the ways that can help decrease your credit utilization ratio, provided your credit card usage remains unchanged. This in turn can positively impact your credit score and increase your chances of securing additional credit.

In case you have a low score, you can also opt for credit advisory services by credit experts from Paisabazaar and rebuild your credit score to increase your creditworthiness in the future.

What to Do If you Don’t Have a CIBIL Score

If you have never taken a loan in the past or had a credit card, you won’t have a credit history. Not having a credit score makes it difficult for lenders to gauge your creditworthiness and the risk involved in lending money to you. This, in turn, may make it difficult for you to secure credit when the need arises.

Thus, if you don’t have a credit history or a credit score, here are a few key ways that can help you slowly work towards building your credit score:

• Get a secured credit card or an entry-level credit card: You can try and avail an entry-level credit card that has relaxed approval criteria. Moreover, you can try and apply for the same with the bank that you have an existing relationship with such as a savings or a salary account. You can also try and get a secured credit card such as a Step UP credit card that is backed up by a fixed deposit and thus, easier to avail. Moreover, use it responsibly and make payments on time to build a positive credit history over time
• Opt for a small loan: To build up your credit history and improve your creditworthiness, you can also avail a small loan such as a consumer durable loan or a credit line. These small loan amounts usually come with shorter tenures and repaying them on time may help you build up your credit history and credit score
• Become a co-applicant: Becoming a co-applicant for a loan with a person who has a good credit history is another way that can help you establish your credit history and gradually build up your credit score.

FAQs

Q. What is good CIBIL score? How much CIBIL score is good?

Ans. A CIBIL score above 700 is generally considered to be a good score.

Q. What is a decent CIBIL score for a home loan?

Ans. A CIBIL score above 700 is usually considered to be a good score to avail a home loan, provided you meet the other eligibility criteria.

Q. What is a healthy CIBIL score for a personal loan?

Ans. A CIBIL score over 700 is generally considered to be good to secure a personal loan, provided you meet the other eight criteria.

Q. What is a suitable CIBIL score for a credit card?

Ans. Usually, a credit score above 700 is considered good to avail a credit card. However, you can also get a secured credit card or enter-level credit card even if you don’t have a credit history or you are new to credit.

Q. Is 769 a good CIBIL score?

Ans. Yes, a CIBIL score above 700 is generally considered to be a good score by financial institutions.

Q. How to maintain a good CIBIL score?

Ans. Given below are a few key ways to maintain a good CIBIL score:

• Pay your credit card dues and EMIs on time
• Check your CIBIL report for errors regularly
• Avoid borrowing more than your repayment capacity and avoid settling your debts
• Maintain a low credit utilization ratio
• Refrain from making multiple loan inquiries/applications within a short period

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