Pay All Bills on Time, Every Time
The single most impactful habit for a healthy credit score is consistent, on-time payments. Your payment history is a major factor in calculating your CIBIL score, as it shows lenders how reliable you are. A single missed or delayed EMI or credit card
payment can negatively affect your score and stay on your report. To avoid this, set up auto-debit for all your regular payments. For other bills, use calendar reminders or apps to ensure you never miss a due date. This simple discipline demonstrates financial responsibility and is the foundational step in repairing your credit.
Keep Your Credit Utilisation Low
Your credit utilisation ratio (CUR) is the percentage of your total available credit that you are using. For example, if you have a credit card with a ₹1 lakh limit and your balance is ₹25,000, your CUR is 25%. Lenders see a high CUR as a sign of financial stress or being 'credit hungry'. To improve your score, aim to keep your overall CUR below 30%. You can do this by paying down balances, splitting expenses across multiple cards, or requesting a credit limit increase on your existing cards, which can instantly lower your ratio. Consistently maintaining a low CUR signals to lenders that you manage your finances well within your means.
Regularly Review Your Credit Report
You cannot fix what you cannot see. Regularly checking your credit report from a bureau like CIBIL is crucial. This allows you to track your progress and, more importantly, check for errors. Mistakes such as incorrect personal information, accounts that don't belong to you, or closed loans still showing as active can unfairly drag down your score. If you find an inaccuracy, you have the right to dispute it with the credit bureau. Correcting these errors can sometimes provide a quick boost to your score. Checking your own score is a 'soft inquiry' and does not hurt it.
Maintain a Healthy Mix of Credit
Lenders like to see that you can responsibly manage different types of credit. This is known as your credit mix. A healthy mix typically includes both secured loans (like a home loan or car loan) and unsecured loans (like credit cards or personal loans). Having too many unsecured loans can be viewed as a sign of higher risk. As you repair your score, focus on managing your existing mix responsibly. Don't rush to close old accounts, as a longer credit history is beneficial. An older, well-managed account demonstrates a long track record of financial discipline.
Avoid Applying for New Credit Frequently
While it might be tempting to apply for new credit, each application can trigger a 'hard inquiry' on your report, which can slightly lower your score for a short period. Applying for multiple loans or credit cards in a short span of time can make lenders cautious, as it may signal financial desperation. If you are in the process of rebuilding your score, it is best to apply for new credit only when absolutely necessary. Focusing on paying down existing debt and practising good habits is a more effective strategy than opening new lines of credit.
