Raise your CIBIL Score from 500 to 750 and boost your Personal Loan eligibility

It’s almost impossible to explore loans or credit cards without coming across one of the most deciding factors in your approval: your CIBIL score. This three-digit number plays a significant role in how lenders view you. It tells them if you are a creditworthy borrower based on your repayment history.

If your score currently sits around 500, don’t see it as a setback. It’s can be a good starting point to reach a good score of 750 or above. When you improve your CIBIL score, you may qualify for better loan terms and smoother approvals. Continue reading to learn how to get a good credit score.  

Common reasons for a low CIBIL score
 

Before you take the steps to improve your CIBIL score, it’s critical to understand why it might be low in the first place. If your score stands at 500, you can understand the reasons behind it and identify which financial habits need adjusting. This is the ideal way to build towards what is considered a good credit score number, 750 or above.

Here are some of the common reasons that may keep your CIBIL score low:

· Late or missed payments
 

Delay in repayments or defaulting on your payments is one of the prominent causes of a low score. Every single missed EMI or late credit card bill contributes to a low CIBIL score. Lenders note such patterns as a sign of poor repayment behaviour.

· Too many credit applications
 

Your every loan or credit card application leads are recorded in your credit report. When you make too many applications simultaneously, lenders conduct a hard enquiry. Multiple applications in a short period make you appear overly dependent on credit. Hence, such frequent checks dent an otherwise good CIBIL score.  

· Errors in your credit report
 

Sometimes, the reason for your low credit score might not be your fault. You may have some discrepancies in your credit report. This may be due to incorrect loan closures, wrongly reported delays, duplicate accounts, etc. They can affect your score without you realising it.

· High credit utilisation ratio
 

Credit utilisation ratio refers to the percentage of total credit you utilise from the available credit limit on your credit cards. When this percentage is high (more than 30%), it shows your financial overdependence. Lenders may interpret this as a sign of risk, which can negatively affect your CIBIL score.

· Unhealthy credit mix
 

If you have only dealt with one kind of credit, say, just one personal loan or credit cards, lenders have limited intel on your credit-handling skills. A diverse credit mix provides them with a well-rounded view. While it may not drastically lower your score, it can make the difference when aiming for what is a great credit score.  

· Co-signing or being a guarantor
 

If you have co-signed on someone else’s loan, their repayment habits directly influence your credit report. If they fail to clear their dues on time, you’re on the hook. It makes you a risky borrower, even if your own payments are sorted.  

· Closing old accounts
 

If you have older credit accounts with a good repayment record, they strengthen your credit history. Closing them too soon shortens your financial track record. This, in turn, reduces your overall available credit, which pulls your credit score down.

Step-by-step process to increase your CIBIL score from 500 to 750
 

Understanding the reasons for your low CIBIL score gets half the work done. Now, you can progress with logical steps to fix what’s wrong. Find below some easy-to-follow, gradual steps to improve your CIBIL score from 500 to 750:

1. Monitor your credit report
 

When you check your credit report, you can stay aware of every entry. You can spot errors or discrepancies early. Whether it's incorrect late payments or duplicate accounts, it helps you report them immediately. With this step, you can keep your credit profile accurate and avoid lowering your credit score over unnoticed mistakes.  

2. Make timely payment non-negotiable
 

Timely repayment is the most critical factor responsible for a steady increase in your CIBIL score. So, it is a good practice to clear every EMI, credit card bill, or other dues on time, even better, before the due date. You can stay on top of them by setting reminders or automating payments.

3. Reduce credit utilisation
 

It is ideal to keep your credit utilisation ratio below 30% of your total available limit. You can pay off your balances regularly and lower your dependency on credit for unnecessary expenses to display a responsible credit behaviour.

4. Avoid multiple credit applications
 

You may think applying with multiple lenders will improve your chances of approval. But spreading yourself too thin with multiple loan or credit card applications leads to hard enquiries. What you can do instead is check your eligibility and only apply when you qualify. Most lenders, like IDFC FIRST Bank, offer free tools to help you, like the personal loan eligibility calculator on their portal.

5. Diversify your credit portfolio
 

You want to show your ability to manage different types of debt to lenders. For example, you can combine a personal loan with a credit card and manage the repayments seamlessly to positively build your credit profile. A well-balanced credit mix like this contributes toward a good CIBIL score.

6. Keep older accounts active
 

If you have credit accounts with a good and long repayment history, it brings value to lenders. So, avoid closing such accounts. Continue to have a record of your positive repayments, even if they’re rarely used. Keeping them active gives loan providers more information on your credit history. It strengthens your financial track record and helps you move closer to a good credit score.

7. Cautiously co-sign
 

You can’t always vouch for how someone would handle their financial responsibility. One who seems financially stable today might not be tomorrow. Thus, it’s better to think through all the possibilities before you co-sign on a loan. Consider becoming a guarantor only when you trust the repayment habits of the primary borrower.

8. Regularly track your progress
 

You may be paying your dues on time and seemingly in a good position with all your debts. But actively tracking your progress as opposed to going about it on a whim makes a significant difference. You want to review your monthly statements and credit reports to keep you accountable. Doing so will also highlight any improvements and help you address discrepancies immediately.

9. Borrow thoughtfully
 

With multiple credit options available today and borrowing made easier, with a simplified application process by lenders, like IDFC FIRST Bank, it is easy to overborrow. It is crucial to take a step back and analyse your income, financial stability, and existing liabilities before you apply for credit. This way, you can borrow what you can repay comfortably and build a good CIBIL score.

10. Build an emergency fund
 

If you don’t have an emergency fund already, it’s time to start building one right away. With this fund in place, you can take care of unexpected expenses without financial crunch and stress. Thus, you won’t be compelled to borrow unnecessarily. Even a small buffer helps with financial stability, protects your existing CIBIL score of 500, and helps focus on implementing other steps effectively.

Final words
 

Improving your CIBIL score from 500 to 750 is all about making smart financial decisions. Now that you know how much a good CIBIL score is and how to get there, you can take the right steps.

With consistent and actionable efforts, you can cross 710+ in due time (which is the eligibility criteria for a FIRSTmoney personal loan). Start with understanding what is holding you back and take it from there. Once you successfully improve your score, you open yourself to affordable loan products like FIRSTmoney personal loan with interest rates starting as low as 9.99%, a loan amount of up to ₹10 lakhs, and zero foreclosure charges.

Check out the personal loan eligibility calculator here.