How To Maintain A Healthy CIBIL Score?

Getting access to multiple forms of credit, such as a credit card or an instant personal loan, has now become extremely easy. All it takes is just a few clicks on the Airtel Thanks app and your personal loan application can get approved in an instant. However, although it seems straightforward, every time you apply for a loan or credit card, your credit score takes a beating, or in other words, a hard credit pull. 

This is why, you have probably read online or have heard from others that applying for multiple loans or credit cards at a single time is not a good idea. These credit scores are calculated by the credit bureaus in India, and CIBIL is one of the most popular bureaus. 

Worried about your CIBIL score? Here is our guide to help you maintain a healthy CIBIL score. 

What is meant by the CIBIL score?

Maintaining a healthy CIBIL (Credit Information Bureau India Limited) score is crucial for securing loans, credit cards, and other financial products in India. A CIBIL score is a three-digit number ranging from 300 to 900, reflecting your creditworthiness based on your credit history. A higher credit score indicates better credit health and increases your chances of personal loan approvals with favourable terms. 

Why is it essential to maintain a healthy or good CIBIL score?

Here is why you should maintain a healthy CIBIL score at all times:

• Banks and financial institutions primarily rely on your CIBIL score to decide whether to approve your application.
• A higher CIBIL score can help you secure personal loans at lower interest rates.
• Credit card issuers use your CIBIL score to determine your credit card eligibility and set credit limits.
• A good CIBIL score gives you leverage to negotiate better terms on loans and credit products.

Read more: Ways to check your credit score online – detailed guide

What are some steps to maintain a healthy CIBIL score?

Here are some steps that will definitely help you maintain a good CIBIL score:

Pay your dues on time

Timely payments are crucial as your payment history accounts for a significant portion of your CIBIL score. Use reminders or auto-pay features to ensure you never miss a payment. Also, avoid paying just the minimum amount due on your credit card.

Maintain a low credit utilisation ratio

The credit utilization ratio is the percentage of your available credit limit that you are using. Keeping it below 30% is ideal and track of your credit card expenses to avoid exceeding the 30% threshold. If possible, request a higher credit limit to maintain a lower utilization ratio.

Do not apply for credit multiple times

Every time you apply for credit or an instant personal loan, a hard inquiry is made, which can slightly lower your score. Thus, avoid applying for multiple loans or credit cards within a short period. You can use pre-eligibility checks to understand your chances of approval before applying.

Make sure you have a good credit mix

A mix of secured and unsecured loans (e.g., home loans, personal loans, and credit cards) can positively impact your score.

Check your credit reports from time to time

Regular checks help you identify errors or discrepancies that may be negatively affecting your score. Remember to obtain your CIBIL report at least once a year to review your credit history. If you find any inaccuracies, raise a dispute with CIBIL to get them corrected.

Do not close older credit accounts

The length of your credit history contributes to your score. Older accounts show long-term credit management. Even if you don’t use them, keeping old accounts open can positively impact your score. In addition, make small transactions on old cards to keep them active.

Read more: How to get a credit card with a low CIBIL score in India?

What are the benefits of maintaining a healthy CIBIL score?

Everyone should have a healthy CIBIL score. It is a great boon. Here are some reasons why:

• A good score provides more financial options and easier access to credit.
• Higher chances of securing loans at lower interest rates and better terms.
• Eligibility for premium credit cards with better rewards and higher limits.
• Some landlords check credit scores for potential tenants, so a good score can help secure better rental agreements too.

Maintaining a healthy CIBIL score is not a one-time effort but a continuous process. Remember that maintaining a healthy CIBIL score shows banks or lenders that you are financially responsible, and makes you much more credit-worthy as well. Ensure that you always pay your bills, EMIs or other monthly payments on time, do not apply for multiple forms of credit at the same time and you will slowly build a very good CIBIL or credit score.