How to Improve Your Credit Score?

A person can improve their credit score through proper financial habits such as paying one’s bills on time, maintaining low credit utilisation ratios, and not applying for several loans or credit cards at once. Having a high credit score helps people get loans approved easily.

People often assume that having good income means you will get credit. However, lenders not only look at your income but also consider many other aspects like payment history, level of debt and overall behaviour related to credit.

Knowing about the process of working with credit scores will allow you to avoid mistakes and build a strong financial profile. This article will talk about the importance of having credit scores, the government's latest clarifications about CIBIL score rules and tips on how you can improve it.

Key Takeaways 

• Timely payment of bills results in a good credit score.
• Multiple applications for loans in a month will have an adverse effect on the credit score.
• Creation of credit history at an early age builds up your financial profile.

• There is no specific credit score set by the RBI.

   

What Is a Credit Score and Why Is It Important? 

The credit score is a three-digit figure, ranging between 300 and 900, which depicts how well you borrow and pay back money. The better the score, the more trustworthy the borrower appears to be to lenders. Any score above 750 is seen as good.

The credit bureaus like CIBIL and Experian calculate this score by looking into various aspects of your credit report. These include your history of loans, use of credit cards, payments made and dues outstanding.

Why Do We Need Good Credit Scores?

• Loans and credit card approvals: It will help banks in the decision-making process on whether to grant your application.
• Better interest rates: Your good credit score might get you better interest rates for loans.
• Higher borrowing: The lender will be more willing to lend you a larger amount due to your good credit score.

All in all, good credit scores facilitate better borrowing.

Government Clarifies Position on CIBIL Score Rationalisation

Clarification on the stand taken by the Government regarding rationalisation of CIBIL scores has been provided by the Ministry of Finance in answer to an unstarred question asked in Rajya Sabha on 29 July 2025. The issue was whether credit scores were harming the credit accessibility of the borrowers and whether there were any plans for change in the same.

Important facts and figures

• There is no set minimum credit score for loans as specified by the Reserve Bank of India (RBI). Lenders have their own policies based on business needs for making the decision of issuing loans.
• Currently, there are four companies with a licence as Credit Information Companies (CICs) in India. The process of computing credit scores is unique for each company.
• Although the processes vary, the RBI has instructed CICs to keep a common range for credit scores of 300 to 900.
• The Government further clarified that in addition to credit scores, many other things were considered by the lenders in order to decide on loans like repayment record, loan settlement, restructured loan, defaults and write-offs.
• The RBI has also suggested to lenders that they should not deny loans to those who do not have any credit history.

3 Ways To Improve Your Credit Score

1. Pay Your Credit Card Bills on Time

Try to make timely payments of the credit card bills always. Delays in payment or non-payment of bills can cause a reduction in your CIBIL score, which will further affect your future chances of getting loans or credit cards. Your credit score may fall below 600 because of frequent defaults on payments.

Things to keep in mind:

• Always make payments for the entire outstanding balance if you can.
• Late payments are listed under the Days Past Due (DPD) on your credit report.
• Your creditworthiness in the future may be hampered by a bad repayment history.
• Automatic payments can assist you in avoiding missed due dates.

Even when you are unable to make the total payment, try to make at least the minimum payment. Even if interest will apply to the rest of the amount left behind, making the minimum payment will help keep your account out of arrears.

2. Refrain from Getting Too Many Credit Cards

Getting too many credit cards or loans at once will decrease your credit score. Creditors might consider many applications as an indication that you are having financial problems.

Consider the following:

• Every application will most likely lead to a hard inquiry into your credit report.
• Multiple hard inquiries may impact your credit score negatively.
• Compare various offers before applying.
• Ensure that you meet the eligibility criteria before making any applications.
• Do not apply for credit cards or loans that you do not require.

In case you are only looking for comparisons, ask the lender to give you a quote or an eligibility check instead of conducting the full credit check on you. This will prevent any impact on your credit rating during your search for various alternatives.

3. Start Building Your Credit History Early

Since a good credit history takes some time to build, it would be a good idea to start building your credit history as soon as possible. Typically, it takes at least six to twelve months to build up a credit history.

Your credit report includes:

• The total amount you've borrowed
• Your history of repayments
• Any late payments that you've made
• Your credit usage

If you lack credit history, it might be tough for financial institutions to gauge how well you can repay a loan.

The way to start building your credit record is by using some credit and maintaining it properly. These steps include:

• Using a low-limit credit card.
• Purchasing something with instalment payments.
• Making regular payments of your bills and EMIs.

Being a good borrower today will help you borrow bigger sums later.

Also Read: 6 Reasons Why Your Credit Score Is Not Increasing

Conclusion

Credit improvement needs time and dedication as well as good financial practices. Timely bill payments, reducing credit applications, and establishing good credit history may help improve one’s credit status over time. Given that lenders take many other aspects into consideration besides credit scores, it is important to have good credit behaviours. Good credit scores open doors for getting affordable loans.

FAQs

1. How often does a credit score get revised?

Credit scores generally get revised when there is any submission of information by lenders to the credit bureaus. Most times, any change in your credit habits becomes reflected in 30 to 45 days.

2. Will closing my old credit card affect my credit score?

It is possible in certain scenarios because by closing your old credit card, you may reduce your credit history along with your credit utilisation ratio.

3. For how long will defaults be shown in the credit reports?

It varies from one credit bureau to another, along with any regulation that applies to them. Lenders have access to such default records when evaluating your credit history.

4. Is an error in my credit report likely to impact the approval of loans?

Incorrect data can negatively affect your credit score. Regular checks are needed, and if there is anything wrong, it should be reported to the agency issuing the credit report.

5. Does being a guarantor impact my credit score?

If you act as a guarantor, then it might indirectly affect your credit score because it means you have taken on more financial risk. Non-payment by the borrower will also affect your credit score.

6. Will a job change affect my credit score?

It will not affect your credit score, but lenders may take into account the fact that you have moved to a new job place when assessing your creditworthiness.

7. Will I damage my credit score when checking it myself?

No, checking your credit score will not affect it because you do not apply for a loan at that moment.

8. Could there be an impact of the joint loan on the credit score of the borrower?

The payment record of the joint loan will affect the credit scores of all the borrowers included in the account.

9. Could there be any improvement in the credit score by means of taking a secured loan?

The timely payments of the secured loan could contribute to a good credit history and, thus, enhance your credit score.

10. How often should you check your credit report?

The checking of your credit report several times a year could help you discover possible mistakes or fraud attempts.