What is a CIBIL score and how do you improve it?

What the score is

A CIBIL score is a number, usually between 300 and 900, produced by TransUnion CIBIL from the credit history that banks and lenders report about you. India has other credit bureaus as well, and each calculates its own score, so your number can differ slightly between them. The idea is the same: a higher score signals lower risk to a lender.

As a rough guide, many lenders look for a score of around 750 or above for their best offers. Below that, you may still be approved, but often at a higher interest rate or with stricter conditions. Every lender sets its own cut-offs.

What goes into it

• Payment history: whether you pay EMIs and card bills on time. This is the biggest factor. Even a single missed or late payment can hurt.
• Credit utilisation: how much of your card limit you are using. Using a large share of your limit month after month suggests stress. Many people aim to keep it well below about a third of the limit.
• Length of credit history: older accounts in good standing help.
• Credit mix: a healthy mix of secured loans (home, vehicle) and unsecured credit (cards, personal loans) is viewed better than only unsecured borrowing.
• New enquiries: each time you apply for credit, the lender makes a hard enquiry. Many applications in a short period can lower your score.

How to improve a low score

There is no trick that fixes a score overnight. Improvement comes from steady, boring behaviour over months.

• Pay every EMI and card bill in full and on time. Set up auto-debit for at least the minimum so you never miss a date by accident.
• Bring card balances down and avoid maxing out a card, even if you repay it later. The balance reported on your statement date is what counts.
• Do not close your oldest card just because you do not use it; it contributes to your history length.
• Apply for credit only when you need it. Space out applications rather than applying to many lenders at once.
• If you have no history at all, start with a small loan or a card secured against a fixed deposit and repay on time.

Check your report and fix errors

You are entitled to a free full credit report from each credit bureau once a year. Read it. Errors do happen: a loan that is not yours, a payment marked late that you made on time, or an account shown open that you closed. If you find one, raise a dispute with the bureau and the lender that reported it, and keep records of your payments.

Checking your own report is a "soft" enquiry and does not lower your score.

What a score does not do

A good score does not guarantee approval, and a low one does not always mean rejection. Lenders also look at your income, existing obligations, employment and the amount you are asking for. This is general information, not personal financial advice.