How to increase your credit score?

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A credit score is a number assigned to each individual based on an individual credit report. It depicts the creditworthiness of a person, i.e. how much worthy a person is to avail the loan or credit. A high credit score signifies a good credit history, which means that a person repays the credit on time. This helps in availing more loans faster as compared to others and at a lower interest rate.

Significance of credit score

Credit score for any individual can lie within the range of 300-900. A score of 700 and above is generally considered well while anything below that is not preferred by banks; a score below 350 are considered poor credit score. Loan applications are generally approved for an individual with a credit score of 750 and above. Bad credit scores can ruin the chance of acquiring loans.

The importance of Credit Score is that it is the first thing checked by a bank before starting the process of loan approval for a customer. A credit score determines the performance by an individual towards loans and credit.

Credit Information Bureau India Limited (CIBIL) is the primary credit information company in India. They play a vital role in the financial scheme of the nation. It was founded in the year 2000, for maintaining credit histories of people from the information provided by the credit companies.

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The ways to improve the credit score are:

  • Payments of bills: It is important to pay the credit card bills and other utility bills on time so that the credit report does not show any default .Online payments should be done keeping in mind the time transaction can take place. When payment is made through cheque, ensuring that the cheque is dropped before the due date.


  • Avoid taking too much credit: Nowadays, people receive calls and emails from various financial institutions that offer free credit cards which develop the thought that having multiple credit cards improves the standard of living.

    However, people do not understand is that owning too many credit cards reflects one is     hungry for more credit and which lowers the chance of receiving credit when it is actually required. Also, multiple credit cards enhance the chances of default and late payment.


  • Wise utilization of credit cards: Credit cards are a great financial tool. They provide us with credit to fulfill our necessities and let us avail benefits such as reward points and air miles. Credit cards also enable us to travel without carrying a large amount of cash.


Credit cards should be utilized wisely, exceeding your credit limit every month is a bad move Hence, an individual should maintain the credit expenses per month. Also, closing your credit card suddenly is not wise as it gives a bad impression about the customer and affects the credit score. Credit cards can be closed after getting an NOC from the bank, which provided the credit card.


  • The balance between secured and unsecured loans: Unsecured loans like personal loans have a negative impact on the credit score of a person while secured loans like home loans, impact credit score positively as they are towards asset creation. So, one should try to minimize the unsecured loan so as to improve credit score positively and maintain a balance between secured and unsecured loans


  • Analyze your credit report: In the case of a bad credit score, one should get a copy of their credit report by applying it on the CIBIL website. The credit report should be analyzed to check all the information in the report is correct and updated. If not, then inform CIBIL immediately about the issue in order to avoid negative impact on the credit score. While clearing the defaults, ensure that the bank records and reports this to CIBIL.


  • Refrain from applying for too many loans: When you apply for loans from multiple banks an inquiry is done, which results in more banks investigating about your credit history. This, in turn, shows that you are desperate for credit. The more the number of inquiries, the more your score dips. So a good way to improve your score is to keep your inquiries to a minimum. For which you can take out your credit report from CIBIL which will give the credit score , in the case of a low credit score banks will provide loans at a higher interest rate. So, select a bank that will provide loans at an affordable interest rate instead of applying in multiple banks.