CIBIL Credit Score – Negative Factors and Ways to Improve your Score

by Shiv Kukreja on August 14, 2012

in Credit, Featured

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Many of you must have checked your CIBIL credit score sometime in the past and for some of you it must have got a surprise either positively or negatively. Some of you might have been caught unaware of a credit card account running in your name with annual charges being levied year after year. Some of you might have undergone for a loan settlement with the lender which could have impacted your score quite negatively.

But to your surprise, some of you could have found your credit score to be quite high, despite defaulting a couple of times. This is due to some unique but scientific methodologies being adopted by CIBIL to calculate your score.

Factors that negatively affect Credit Score:

1. Late payments or defaults in the past: Your payment history has a significant impact on your credit score. So, if you have missed payments on any of the existing loans over the past couple of years, then the credit score would get negatively affected as it indicates you are facing difficulties in servicing the existing obligations.

2. High utilization of credit limits: You must remain quite careful while using the credit limits available on your credit cards. A higher and higher utilization pattern against the available credit limits is an indication of an increased repayment burden and may negatively affect your credit score. Lower outstanding balances getting reflected in your credit card statements improve this score.

3. Higher percentage of Credit Cards or Personal Loans (i.e. Unsecured Loans): A higher number of unsecured loans coupled with a high utilization would also affect the score in a negative way because of the fact that these unsecured loans carry a very high rate of interest as compared to secured loans like home loans or car loans and result in larger payments and higher defaults.

4. Behaving Credit Hungry: If you are behaving “Credit Hungry” (i.e. in an urgent need of money) and have applied for new credit facilities with a large number of lenders, then it is going to affect your score negatively and make the lenders more cautious while evaluating your application for a fresh loan.

Can your CIBIL Credit Score be improved? If yes, how?

As I mentioned in my earlier post, it is like a CAT examination. Like you can always improve your CAT score by appearing for the exam again, your CIBIL credit score can also be improved, but not overnight. If you have taken a 20-year home loan which is just a couple of years old and you’ve defaulted on your EMIs 3-4 times since the beginning, then it will probably take you at least 2-3 years or probably more than that with regular EMI payments to improve your score. You will have to maintain the greatest of financial discipline in order to secure a better credit treatment in the future. Here is how it can be done.

Measures to improve your Credit Score:

1. Pay your loan EMIs regularly in a timely manner to maintain a clean credit history: Try to keep a diligent track of your EMIs in case you are running more than one loan.

2. It is highly advisable to make full payments on your credit card instead of just the minimum payment. In case it becomes very difficult to pay the bill in full, at least make the minimum payment without fail.

It takes you a longer time to build your credit history with a loan as compared to a credit card as these loans are usually for a longer tenure whereas a regular payment of your credit card bills can help you start building a good credit score as you keep on making the regular payments. A credit card debt is categorized as a revolving credit and it helps in building a good credit score faster if the payments are regular.

3. Do not apply for an extra credit card unnecessarily when your bank’s relationship manager approaches you to get one and actually you do not require it. Applying for an extra card or a loan without any requirement would mean more credit exposure and reaching near the card’s credit limit would result in a lower credit score.

4. If you have been issued a credit card but you have not used it very frequently or the utilize credit limit has been very low, then this would affect your credit score in a positive way as unused credit cards actually imply that you are financially secure.

5. You should use special incomes like bonus or a monetary gift or some other source of savings for the prepayment of some of your existing debt. Early repayment of debt also helps in improving your score.

6. Avoid becoming a joint account holder or a guarantor in a loan or a credit card facility as any default would lower the quality of your credit score.

7. Avoid going in for a settlement or “write-off” of your loan accounts as it implies that you have not been able to pay the past dues. Keeping the credit history clean improves your credit score.

8. You should keep reviewing your credit history on a regular basis to ensure that the credit report accurately reflects your current financial status.

At the end of the day, common sense should dictate what you do with your financial life and good financial habits along with awareness of credit scores will help you build a good credit history and a good credit score.

Views: 33520


Get free daily updates in your email:






{ 148 comments… read them below or add one }

Prabs May 23, 2013 at 12:22 am

Dear Shiv,

Iwanted to go for a home loan and before applying for the same, I applied for my CIBIL score. Unfortunately my CIBIL score as on 20 May 2013 is 601.

I had a vehicle loan which I had defaulted a few times, but I have foreclosed the loan a month back. Also there were 2 credit cards which I had assumed would get closed by itself (in 2008). Unfortunately, the annual fees kep accruing and just this afternoon, I have paid 2 cheques to settle my out standings.

How long would it take before my CIBIl score improves. I want to go for a housing loan in next 40 – 60 days. Do you think it would be possible?

Please advise.

Reply

Shiv Kukreja May 25, 2013 at 12:06 pm

Hi Prabs,

It is very difficult for me to guesstimate the time it would take your CIBIL score to improve, but I think if you apply for a home loan with a lower “Loan to Value” (LTV), then it increases the probability of you getting the loan. e.g. If the property your are planning to purchase is worth Rs. 30 lakhs & you manage to pay majority of the cost on your own, say Rs. 16-18 lakhs, then the lender would be happily willing to extend you the loan with even this credit score of 601.

Reply

Prabs September 6, 2013 at 12:03 pm

Hi Shiv,

I would like to thank you for your advise. Also some of the posts/comments also did help me in improving my scores.

I bought my scores yesterday and found that the score has improved to 725. Moreover, there are no out standings now. I have one credit card which I have not used for more than 6 months now.

Hopefully I would get a home loan.

Reply

Shiv Kukreja September 6, 2013 at 4:05 pm

That is great Prabs, I am glad it helped you !!

Reply

sandeep awasthi May 25, 2013 at 4:36 pm

Is there any bank or Financial unit which offers Personal loan in cibil score of 630

Reply

Shiv Kukreja May 26, 2013 at 11:03 am

Hi Sandeep,
CIBIL score alone is not the only factor which the lenders look for while taking their decisions to extend loans to the borrowers. Every lender has its own risk management systems and other parameters to judge your repayment capacity. So, it is not possible for us to name any financial institution which can offer you personal loan with CIBIL score of 630. You should try it yourself with some of the lenders.

Reply

Albatross June 16, 2013 at 4:25 am

Hello Everyone,

I was told by a few banks that every time I order my cibil report online the score drops (deduction of 30 points) is that true?
I have ordered my report more than 5 times now. Score was NH for the first time when I ordered in Sept 2012. Then 804 in Jan 2013, 739 In march 2013, 652 in Apr 2013 & May 2013, 623 in June 2013.
What is going on? Why is the score dropping so drastically? I have always made payments on my loans and credit cards on time.
Why can’t people have a systematic procedure which helps consumers and not torture them in life.
Loans/cards applied through marketplace also gets declined, what is the point in having such a cibil marketplace which is of no use?
I’m currently going through a horrifying experience with the Banks in our country. I have been trying to avail a personal loan since Oct 2012 from financial institutions and have been unsuccessful all the time. All my loans and credit card applications are being declined. None of the banks are able to provide me with the same. I understand that the sanction of loan is at the sole discretion of the bank. We come across so many ad’s regarding loans. Just like any common man I applied for a few as well. I have almost approached every single bank in our country and have been unsuccessful in getting a personal loan. I and my wife are salaried with a household income of 90,000 per month, we have our own house in Bangalore. Even after this I’m told that i’m not eligible for loans by each and every bank. There have been many instances where I have shared my cibil score prior to application and was always convinced that the loan will be sanctioned since the report looks clean. But then they decline the loan again. Me and my family are going through a very rough time with these banks. All I needed was a loan of 4 to 5 lakhs to clear our debts and start a new life. But never knew that getting a loan is this difficult in our country. I think RBI needs to look into the policies, procedures and norms that banks follow in granting a loan. I have approached the below mentioned banks for loans and have face rejection now and then for no reason. ICICI Bank, Standard Chartered Bank, HDFC Bank, ING Vysya Bank, HDB Financial, Bajaj Financial, Axis Bank, Kotak Mahindra Bank, Indusind Bank, Citibank and so on. I have a secured job and i’m salaried since 8 years. All these banks have rejected my loan application for one or the other reason and has never shared the reason for declining the loan applications. This has been such a disappointing and terrifying experience. Please help with your inputs and give me advice.

And yes, Apologies for the wrong name as I didnt want to disclose my name.

Reply

Gautham June 24, 2013 at 11:17 pm

Hello Shiv,

I just got my CIBIL report and score today and got to know that my scores is 684. In the report the first one is showing as a write-off on my two wheeler loan taken 8 years back where as I have closed the account by paying the whole balance. Now what do I need to get this corrected.

Also 2 of the credit cards taken long back do not have a closer date but there is no written-off and anything mentioned.

Please advice.

Reply

Credexpert August 3, 2013 at 5:48 pm

Dear Gautham,

If you have paid off all the EMIs on your two wheeler loan and the bank has given you a “No dues outstanding” certificate stating that you have closed your account, then you can raise a dispute with CIBIL for the incorrect status mentioned in your report.

You can raise a dispute at the follow link: http://www.cibil.com/consumer-dispute-resolution

In case of your credit cards, if there is no date closed, it means that you are currently using the cards. If you are not and you have closed the credit card accounts, you may include the same in the CIBIL dispute.

Regards,
Credexpert.
http://www.credexpert.co.in

Reply

som June 26, 2013 at 2:52 pm

Hi,

I have setteled all my overdues in my cards and my loans one year back-where in i have received all the noc.

Now i have come to know my cibil score is 600-suggest how to improve it now?

Reply

Credexpert August 3, 2013 at 5:49 pm

Dear Som,

Settlement of any credit facility has a negative impact on your score. To improve your credit score, you may repay the outstanding on your accounts, and depending on the bank’s policies, the settled status may be removed from your account.

The other way to improve your score is to build a new credit history. This can be done by getting a new credit facility such as a secured credit card and service this regularly to show good payment behaviour. This will reflect on your credit report, and in time improve your score.

Regards,
Credexpert.
http://www.credexpert.co.in

Reply

sadhu August 2, 2013 at 4:07 pm

Hi Manish,

My CIBIL score is badly affected because of a personal loan. Current score is 540. The personal got closed on Nov, 2010. I recently applied for a Home Loan and got rejected. On enquiring for the reasons, I got a shocker, saying the personal loan has 2100/- outstanding. The reason for this amount was because of the bank triggered ECS twice for 6 months and hence the late fees remained which I was unaware of. Now a month back I have cleared it with full payment and filed a request with the Bank for which I got a mail stating that the amount will be refunded. Now the funny part is, I paid them 15000 including interest but I will get only 2100 as refund.

Now my goal is to improve my credit score. I am using a CC card since an year and its history is quite clear.

do I stand any chance of getting my score because of the refund I got from the bank and full payment I made to them?

thanks in advance.

Reply

Credexpert August 3, 2013 at 5:51 pm

Dear Sadhu,

We can assist you with your query, if you could clarify on the following points:

1. “the bank triggered ECS twice for 6 months and hence the late fees remained”. What do you mean by this statement?
2. “I paid them 15000 including interest but I will get only 2100 as refund.” Please clarify as to what this amount is for, and why you had to pay them Rs. 15,000.

If the account on your credit report shows a closed status with “zero” balance, it may marginally improve your score. Also, using a credit card and paying your dues on time will improve your score gradually.

Regards,
Credexpert.
http://www.credexpert.co.in

Reply

Vivek Phadke August 14, 2013 at 6:57 pm

I have seen my CIBIL report and it has all wrong information in it. My address is wrong, my telephone numbers were never known to me and it gives two instances of credit cards supposed to be closed in 2001, still carrying 150 days and above overdue amounts which are written off, I don’t know what what reason. It shows I had 6 credit cards in the past, where, what I remember are only 2 and that too closed long back.

I have tried to write to CIBIL to know who has given this wrong info or if someone else’s data is included in my report, but they do not respond.

It gives a completely wrong picture to a new person looking at the report. If banks or credit card organizations can be allowed to spoil your report without giving a chance for you to review the same and give your version also, this is unfair and devoid of rights of the consumer.

Reply

Credexpert August 15, 2013 at 2:24 pm

Dear Mr. Phadke,

Cibil and other Credit bureaus have a process in place where the KYC provided by you to access your report might have got mis-matched with the database and that’s when the wrong data is reflecting in your credit bureau report. As you have asked CIBIL to rectify the data, they will have their own mechanism in place because at their end they would have to do some verification to clean your credit bureau report.

In certain cases, you may have to coordinate with the respective lending institution for getting your account information updated correctly.

Also, in case of your demographic information such as addresses and phone nos., these details are recorded and updated on your report as per any prior applications you may have made with them.

We at Credexpert are celebrating Independence Day with our clients to become debt free and live credit healthy. We have exciting offers and discounts on our products to monitor your credit bureau score and report on timely and regular basis.

Regards,
Credexpert
http://www.credexpert.in

Reply

Chandan Baran Das October 5, 2013 at 2:02 pm

I had a Edu Loan at 2007 but due to some personal reason it was delayed but at 24 Aug 2013 i have paid the full amt with interest.But still in the cibil report it is showing defaulter. And now my Cibil Score is 622 only. Please give me suggestion…when it will delete from my CIBIl as an defaulter? How much time will take to update?

Reply

mahesh November 7, 2013 at 10:39 pm

hi. i just got my cibil score report and it shows 757.
i got a current balance of -800 for my credit card which i was closed 1 year ago and that was the excess payment i made at that time. is negative current balance is good or bad.

Reply

Sree February 19, 2014 at 11:31 am

Hi

I’m a HSBC credit card holder. Twice I have converted my dues into 3 months EMI option. My question, does EMI conversion effects credit score?
Also, please advise atleast what score one should have to get loans/CC from banks.

Reply

Prashanth April 12, 2014 at 3:59 pm

Hello,

My CIBIL score in 647 and loan gets reject 3 times now. I have taken a loan of 50K and due to some my personal problem i left the company and not paid EMI upto 4 month…Suddenly i got legal notice from bank to pay the amount…At the same time i paid all the remaining amount with late fine of 7K approx. Apart from this i am using 2 credit cards and paying bill on time. Now which bank will provide me personal loan as its quite urgent need to Loan.. Please advise me and also how to increase my CIBIL score and i dont have any other option apart from Loan. Please advise…

Reply

Rahul June 6, 2014 at 9:19 pm

Hi Shiv

My current CIBIL score is 836.
In 2009, I first got to know about cibil when my home loan application got rejected. I tried to find out reasons, it was due to 3 credit cards and one personal loan, this happened due to address change
I immediately followed up with the credit cards and settled them, also I settled personal loan. Currently my credit cards show as settled but personal loan shows a written off.
I continue to have 1 credit card with clean payment history.
with CIBIL score of 836, can I apply for a home lone now?

Reply

Shiv Kukreja September 8, 2014 at 1:45 pm

Yes, you can go ahead and do that. I don’t foresee any reason for a rejection.

Reply

ankit singh June 18, 2014 at 2:53 am

Hi shiv sir…..

Pls help me out .. It’s lil crutial….. I hve two credit cards… One is with citibank whose credit limit is 86000 out of which available balance is around 8000… Nd the other card is with hdfc bank whose credit limit is 50000 …. Of which 15350 is available…both cards were issued in the month of january 2014.. I converted a part of the credit ( around 60 k ) into installmenys nd the rest of the amount is shown as due in the statements …. My concern is regarding my cibil report… I always made payments on tym … I hve revolved the credit but hve always made payment more thn minimum due nd before due date…..
I plan of applyin for a new card as my cards are now more thn 6 mnths old… So that i can get loan on card ehich i can use to repay these cards.. As there comperative interest would be very low…. So sir pls help me out… Shd i go ahead and apply for the card or shd i not do that coz a rejection will hurt my credit score ?? I have never defaulted any payments..will my score be good or average or bad… Approximately… Sir i am relying on your experience… Pls help me out….. Thanks in advance

Reply

Shiv Kukreja September 8, 2014 at 1:41 pm

Hi Ankit,
Your score would be fine and I don’t see why your application would get rejected. You can go ahead and apply for a new card.

Reply

ritu August 12, 2014 at 9:15 pm

I have cibil score 695 and have one ecs bounce this month which is not mention in my cibil.so i have two question,
1.am i eligible to get education loan and what are the chances.
2.how much my cibil be reduced?

Reply

Shiv Kukreja September 8, 2014 at 1:37 pm

Hi Ritu,
Only the lender(s) would be able to tell you whether you fulfill their loan criteria or not. Also, we won’t be able to tell you how much your CIBIL score would have reduced due to one ECS bounce.

Reply

John. August 18, 2014 at 6:43 pm

HI All, I had applied for my first credit card(CiTI BANK) . But they had rejected my application , HOw come they can reject my application form even if i doesn’t have any credit card history . i doesn’t have any loan also.

Reply

Shiv Kukreja September 8, 2014 at 1:34 pm

Hi John,
It is the banks’ discretion whether they want to issue a credit card to any customer or not based on his/her income and credit score.

Reply

suresh August 21, 2014 at 6:55 am

Hi,

I am planning for a home loan now. I have 5 personal loans all 5 with a clean record. And a Citi bank credit card last month I had an outstanding which I couldn’t clear but cleared this month. How would credit score look like please advice.

Need your advice urgently.

Reply

Shiv Kukreja September 8, 2014 at 1:33 pm

Hi Suresh,
It is not going to affect your credit score in a major way. For precise score, you need to buy your credit report.

Reply

AKBAR BASHA MOHAMMAD September 4, 2014 at 11:48 am

My credit score is 609.
I would like to whether iam eligible to take any home loan in future from any bank??

At present I am in UAE with 11000 /- AED salary

Reply

Shiv Kukreja September 8, 2014 at 1:31 pm

Hi Akbar,
Though your credit score is low, it depends how much home loan you need vis-a-vis the value of your property. CIBIL credit score is not the only criteria banks check before taking their decisions. Still, it is better to get your credit report and try to improve your score.

Reply

swaminathan September 5, 2014 at 2:11 pm

Sir,

I have applied for citibank credit card last week with required documents and phone verification also over. salary wise i am purely eligible for credit card.but now i got the email from citi bank, that my application was rejected.”We regret our inability to process your credit card application as it does
not fulfill our internal policy criteria”. I got the information from customer support team that the application was rejected due to CIBIL report is negative. I was surprised to hear that as i have never used any credit card / borrowed a loan / any liability in the past.
for my clarification i applied for CIBIL report also by paying rs.470. it will take 7 business days to deliver.what could be the reason for the rejection.

My only guess is i am having IOB saving account, that was locked 2 times due to non usage of the account more than 6 months.

Is may be the reason for CIBIL negative report?

please advice.

Reply

Shiv Kukreja September 8, 2014 at 1:12 pm

Hi Swaminathan,
I don’t think non-usage of a savings bank account could be the reason for a rejection of a credit card. Please wait for your CIBIL report to know the exact reason.

Reply

swaminathan September 15, 2014 at 10:54 am

Hai Sir,

I got my CIBIL report. my score is showing as ‘NH’.

And i don’t have any credit history so far.

What i have to do next.?

Reply

Shiv Kukreja September 15, 2014 at 11:14 am

Your credit card application probably got rejected as you don’t have any credit history or your income level does not match Citibank’s criteria. So, you should probably approach some other credit card company or take some secured loan first like a home loan or a car loan.

Reply

Ravindra September 13, 2014 at 9:05 pm

Hi,

I checked my CIBIL score and it reads 795 then i applied for Personal loan with Bajaj Finance and it got reject citing CIBIL norm does not met. In past 2011-12 i used to have 4 CCs which had dues to paid. I made all the outstanding payments for all 4 cards once i became financially sound in mid 2012. I can see all four card showing close status and one of them from SCB has a status as WRITTEN-OFF. Now i am not sure why they made this as written-off though i paid entire outstanding amont after few months of default. Please help me how to get it removed from CIBIL .

Reply

Shiv Kukreja September 15, 2014 at 11:18 am

Hi Ravindra,
You should approach SCB and ask them to get it rectified in your CIBIL report. If they do not cooperate in this matter, you should approach CIBIL for dispute resolution.
http://www.onemint.com/2012/09/14/cibil-dispute-resolution-process-rectification-of-discrepancies-in-credit-report/

Reply

Mahesh September 25, 2014 at 1:08 am

Hi,
Actually my credit score is 721, but i have some delay payments.
I applied for so many loans but all got rejected.
I spoke with one of the banker before applying and he told that 720 is enough for that bank and as i got 721, i again applied but still got rejected.

My question is if there are any delay payments how can my score got 721 and if that bank will lokks only for score (720) why my loan got rejected.

Your valuable answers will be appriciated.

Thanks in Advance
Mahesh…

Reply

Leave a Comment

Previous post:

Next post: