Start by Reviewing Your Credit Report
Before you can fix the problem, you need to understand it. Your CIBIL report is a detailed record of your credit history. The first step is to get a copy of your latest report and review it carefully. Look for any inaccuracies, such as incorrect personal
details, accounts that don't belong to you, or payments that have been wrongly marked as late. Sometimes, a low score isn't due to poor behavior but simple administrative errors. Identifying and disputing these mistakes with CIBIL is a crucial first step. The dispute resolution process can be initiated online through the CIBIL portal.
Make All Your Payments on Time
Your payment history is the single most important factor influencing your CIBIL score, accounting for about 35% of it. Late payments or defaults, no matter how small, can significantly drag your score down. To build positive credit behavior, commit to paying all your dues—including loan EMIs and credit card bills—on time, every time. A simple way to ensure this is to set up automatic payments or reminders for your due dates. Consistent, timely payments are the foundation of a healthy credit profile and show lenders you are a reliable borrower.
Lower Your Credit Utilisation Ratio
Your Credit Utilisation Ratio (CUR) is the percentage of your available credit that you are using. For example, if you have a credit card with a ₹1 lakh limit and a balance of ₹40,000, your CUR is 40%. Lenders see a high CUR as a sign of financial stress. To improve your score, aim to keep your overall utilisation below 30%. You can do this by paying down your balances or even requesting a credit limit increase on your existing cards, which instantly lowers your ratio if your spending stays the same. Spreading your expenses across multiple cards can also help keep the CUR on any single card low.
Maintain a Healthy Credit Mix
Lenders like to see that you can responsibly manage different types of credit. This is known as your credit mix. An ideal profile contains a balance of secured loans (like a home or car loan, which are backed by an asset) and unsecured loans (like credit cards or personal loans). Having only one type of credit, especially multiple unsecured loans, can be viewed as risky. A healthy mix demonstrates financial maturity and your ability to handle diverse repayment structures. However, you should not take on new debt just to diversify; this should happen naturally as your financial needs evolve.
Avoid Frequent Applications for New Credit
Every time you apply for a loan or a credit card, the lender makes a 'hard inquiry' on your credit report. While a single inquiry has a minimal impact, multiple applications in a short period can lower your score. This behavior suggests to lenders that you are 'credit hungry' or potentially facing financial difficulty, making you a higher-risk borrower. If you are trying to rebuild your score, it is wise to limit new credit applications. Space them out and only apply when you have a genuine need. This shows financial discipline and helps protect your score from unnecessary hits.
Keep Your Old Credit Accounts Open
The length of your credit history also plays a role in your CIBIL score. Lenders value a long and positive credit history. For this reason, it's generally a good idea to avoid closing your old credit card accounts, even if you don't use them frequently. An older account with a good payment record demonstrates a long-standing ability to manage credit responsibly. Closing an old card can shorten your credit history and also increase your credit utilisation ratio by reducing your total available credit, both of which can negatively affect your score.
