How to Improve CIBIL Score for Loan

If you go to any bank to take loan, bank will seek several documents such as KYC documents (Aadhaar and PAN), last 3 years financial statements (i.e. I.T. file) etc. After satisfying with these documents bank will check your CIBIL score. If your CIBIL score is poor, bank will not give you loan, even after satisfied with your other documents.

What is CIBIL ?
CIBIL [Credit Information Bureau (India) Limited] is a company that maintains the records of all the credit related activities of companies as well as individuals including credit cards and loans.

What is CIBIL score ?
A credit score is a three digit number between 300-900. Generally 750 or above is considered as a good CIBIL score.

Score	Remarks	Chances of loan availability
300-550	Poor	Difficult to get any kind of loan wheather secured or unsecured.
551-650	Average	May be able to get a secured loan but would not be in a position to negotiate a better rate of interest.
651-750	Good	Opens up options for unsecured loans along with high ticket secured loan but still may not be able to negotiate better deals on loans.
751-900	Excellent	Great chance of getting approved for a loan at competitive rates of interest.

CIBIL Score Factors
Following factors can affect your CIBIL score, such as

• Credit repayment history: Any default on loan and credit card bill can make negative impact in your credit score. Pay EMI and Credit card bill on time to get better credit score.
• Credit Utilization Limit: High credit utilization limit over time can give negative impact on credit score.
• Multiple loan application: Multiple loan application means multiple  CIBIL score and credit report inquiry by such bank or lending institution. Too many of such inquiries will made bad impact on your credit score. Also if you apply for loans with more than one financial institution in a same period, you will be treated as a credit hungry person and your credit score become low.
• High percentage of unsecured loans: High percentage of unsecured personal loan or credit card expense can make negative impact on credit score.
• Giving guarantee for loan: If you act as a guarantor of another person's loan, it will affect your credit score. But if that person defaults or delays payment then it will have anegative impact on your credit score.
• Loan servicing term: If you are repaying loan amount timely, it will have a positive impact on your credit score.
• Delayed or wrong credit reporting: The delayed or wrong reporting by bank or credit card company may reflect faulty information on your credit report and reduce CIBIL score. So, it is necessary to check credit report every six months to rectify errors, if any.

How to improve CIBIL score?

• Pay outstanding dues: Try to clear off all the outstanding dues because unpaid outstanding can reduce your credit score.
• Update credit report: Sometimes bank or credit card companies delayed to update credit information. So check your credit report and if any you found any error, tell your bank or credit card company to update credit report. Take an account statement and closure certificate in case of closing the account.
• Raise Dispute: If you have valid points to disagree with credit report, you may appeal at CIBIL website (www.cibil.com) to correct the error.
• 30% rule of credit utilization: Never use your credit card to buy each and everything and never exceed more than 30% of credit utilization. 
• Avoid making too many inquiries: Do not check the CIBIL score so often, it can decrease you credit score. Three and more inquiries in a month can make bad impact on your score.

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