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

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.

276 thoughts on “CIBIL Credit Score – Negative Factors and Ways to Improve your Score”

  1. hi guys,I have one credit card that I pay off every month and never charge more than 20 percent of its limit. My house, vehicle, etc. are all paid for. I spend very little as I need little. I have been frugal all my life and now I find a credit score of 500. I don’t owe a soul and am very careful with my money. I just don’t understand why I am penalized for that..I contacted a credit scoring firm to figure this whole thing out for me but got turned down several times not until I read about a well recommended private investigator..He is all over the internet and nobody has ever spoke negative of him…I took a leap of faith and gave him a try..He boosted my scores 780 and I can’t thank him enough..He’s blunt and honest..And he respects whatever agreement you make with him..You all should give him a try for your credit score boost..His contact details are cagedpeter@fastservice.com

  2. Hi, great article.
    Unfortunately I am also a victim of low cibil score and was looking measures to improve it. Will try the above actions. Thanks.

  3. Hi,
    Very informative article and great discussion as well.
    I had a good CIBIL score 2 years back and was paying my personal loan emi regularly and my credit cards payments also but due to crunch in my career I could not pay it further and my CIBIL was effected badly. Even then I could be able to clear my 2 credit cards dues and surrendered them. Now I have a score of less than 500 and also having market debts. Please guide me if I can get any personal loan in this situation so that I can pay my market debts and also can improve my score as well.
    Regards.

  4. Hi, great article.
    Unfortunately I am a victim of low cibil score and was looking measures to improve it as I also wanted to avail a personal loan to renovate my house. Please suggest me as the banks keep cibil score as the fundamental factor in giving loans.

  5. Hi, great article.
    Unfortunately I am a victim of low cibil score and was looking measures to improve it as I also wanted to avail a personal loan to renovate my house. Please suggest me as the banks keep cibil score as the fundamental factor in giving loans.

  6. Hi Shiv,

    I have major issues with my cc with ICICI Bank. I have a debt of around Rs 45,000/- overdue for the last 7-8 years which shows on CIBIL report as pending (during which I was financially very down due to husband’s bad health and loss of job). Now, that I am in abetter position I want to pay it off and make my CIBIL report better. The CIBIL report shows an amount of Rs 45000 (approx) pending and it’s reported every month to CIBIL. How do I go about paying it off? Should I pay without consulting with the bank as I have read that contacting banks and settling same has an adverse affect on my CIBIL report? What options do I have to pay it off?

  7. Hi,

    My cibil score was always above 700. I started to use sbi credit card with due date as 27 of every month. I used to pay on 1 st of every month thinking it ll not effect since its only 3 days past due. Now my score has reduced to 585 and top up loan application is rejected as well. Pls help me to understand how to improve my cibil score and timelines required to get back to 700 if i clear all dues in this credit card

  8. Sir, I am having a personal loan from Axis Bank. I had many bounces. Only 3 EMI are pending now. But I want to foreclose my account paying all the dues and charges. Will my CIBIL be cleared and within how many days I can apply for fresh personal loan??

    Please reply.

  9. Hi ,
    Somebody misued my documents and got issued 3 credit cards (03 banks)with outstanding of 6 lakhs. When this came to my knowledge I immediately checked my cibil score and found it 539. I lodged complain at local police station and contacted all three and after long 6 months fight with them all of them finally waived off my outstanding,Then again I checked my cibil score and saw that all three cards are removed from my cibil report.but my cibil score is 684. which used to be aarlier 750. what to do?

  10. Hi,

    Can some one help me to know im having a score of 797 which was quiet less but has increased since last 1-2 years as there were some business issues. Now if im applying for a credit card its getting rejected due to banks internal process as i do not meet the their criteria. Can some one help whats the exact cause. Im paying all my dues well in time for last 2years. Score is 797 im a bit confused with the banks credit card approval strategy.

    Thanks

    Sunny-9560725111

  11. Hi,

    Can some one help me to know im having a score of 797 which was quiet less but has increased since last 1-2 years as there were some business issues. Now if im applying for a credit card its getting rejected due to banks internal process as i do not meet the their criteria. Can some one help whats the exact cause. Im paying all my dues well in time for last 2years. Score is 797 im a bit confused with the banks credit card approval strategy.

  12. Hello, you are looking for a loan aid, your worries are final and the solution is from Ashad lore credit company (companyofashad.tkr@gmail.com) where you are making a quick loan application from $ 5,000 to $ 10 million. You will get approval within two days, contact now via email: COMPANYOFASHAD.TKR@GMAIL.COM. Now for any kind of loan with interest rate of 2%.
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  13. Hi,

    I have paid total amount of Rs 35000 against my HDFC credit card after 6 months of late payment, i didnt go for settlement and paid the whole amount with Interest , how can i get my NOC letter from bank and from where to approach and will it also improve my cibil score as it is very low.

  14. We provide Personal Loans, Home Loans, Business Loans etc…all over the India, with any issues in cibil. And if there is any issues in updating or improving cibil score we will help you in getting updated, as soon as possible. Also we do help you to get the loans in a week with (Private Sector Banks, Public Sector Banks, Foreign Banks, Nationalised Banks & Chit Funds). with the very low rate of interest (upto 2%) please call us for further queries immediately 9739870082

  15. We provide Personal Loans, Home Loans, Business Loans etc…all over the India, with any issues in cibil. And if there is any issues in updating or improving cibil score we will help you in getting updated, as soon as possible. Also we do help you to get the loans in a week with (Private Sector Banks, Public Sector Banks, Foreign Banks, Nationalised Banks & Chit Funds). with the very low rate of interest (upto 2%) please call us for further queries immediately

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