What Is a CIBIL Score and Why It Matters
Your CIBIL score is a three-digit number, ranging from 300 to 900, that summarises your credit history. Think of it as your financial report card. Lenders in India, from banks to NBFCs, use this score to assess how likely you are to repay a loan. A score of 750
or above is generally considered excellent, making it easier to get approved for credit with favorable interest rates. A score below 650, however, can make securing loans difficult and more expensive. Your score is influenced by factors like your payment history, how much credit you use, and the types of loans you have.
Habit 1: Master the Art of Timely Payments
This is the single most important habit for a healthy credit score. Your payment history is a major factor in your CIBIL score calculation. Missing or delaying even one EMI or credit card payment can negatively impact your score and stay on your report for a long time. To build this habit, set up automatic payments for all your bills and loan EMIs. Creating calendar or app-based reminders a few days before the due date can also prevent you from missing payments. If you can't pay the full amount on your credit card, always pay at least the minimum amount due to avoid being reported as a defaulter.
Habit 2: Keep Your Credit Utilisation Low
Your Credit Utilisation Ratio (CUR) is the percentage of your available credit limit that you are using. For example, if your credit card limit is ₹1,00,000 and your outstanding balance is ₹40,000, your CUR is 40%. A high CUR suggests you are heavily reliant on credit, which can lower your score. Financial experts recommend keeping your CUR below 30%. To practice this habit, make it a point to pay your credit card balances in full each month. If you can't, try making multiple smaller payments throughout the month to keep the outstanding balance down.
Habit 3: Regularly Review Your Credit Report
You can't fix what you don't know is broken. Errors on your credit report, such as incorrect personal details, accounts that don't belong to you, or closed loans still showing as active, can unfairly drag down your score. The RBI allows you to get one free full credit report from each of the four credit bureaus (including CIBIL) every year. Make it a habit to check your report for any inaccuracies. If you find an error, you can raise a dispute online with the credit bureau to get it corrected.
Habit 4: Maintain a Healthy Credit Mix
Lenders like to see that you can responsibly manage different types of credit. A healthy credit mix includes both secured loans (like a home or auto loan, which are backed by an asset) and unsecured loans (like a personal loan or credit card). Having too many unsecured loans can be seen as a sign of financial stress. While you shouldn't take on debt unnecessarily, having a balanced mix of credit and managing it well over time demonstrates financial discipline and can positively impact your score.
Habit 5: Be Strategic About New Credit Applications
Every time you apply for a new loan or credit card, the lender makes a 'hard inquiry' on your credit report, which can cause a temporary dip in your score. Applying for multiple credit products in a short period can make you appear 'credit hungry' to lenders and hurt your score significantly. If you're planning to apply for a major loan, avoid applying for other forms of credit for a few months beforehand. This shows lenders you are financially stable, not desperate for credit.
