7 Effective Tips On Fixing a Bad Credit Score!

Updated on November 19, 20187 mins read
7 Effective Tips On Fixing a Bad Credit Score!

Your Credit Score plays a critical role in the approval of your loan. Credit Scores are calculated by Credit Information Bureaus, based on an individual’s credit history. CIBIL is the primary credit information company in India that calculates credit scores of individuals and body corporates.
CIBIL was founded in the year 2000. Since then, it has played a crucial role in India’s economic and financial system as it helps financing institutions to get a complete image of an applicant’s payment record by providing information regarding their payment track record and credit history, thus reducing the number of bad loans. A bad credit score could be the reason why your last loan didn’t get sanctioned.

Here is more about CIBIL score and tips on how to improve your credit score so that your loan application never gets rejected!

What is CIBIL TransUnion Score?

CIBIL TransUnion Score or CIBIL score, is a 3 digit numeric summary of your credit history which is formed by the statistics provided by the Credit Information Report. CIBIL score ranges from 300 to 900. Your score will indicate your creditworthiness.


What it Means

How it Affects you


  • An outstanding score, which indicates a flawless and consistent track payment record.
  • You will easily obtain secured loans such as home loans and car loan and unsecured loans such as credit cards and other personal loans.
  • Lower interest rates provided by banks.


  • Lower score due to irregularity and delays in payment of debts.
  • Banks won’t sanction a loan unless provided with a high collateral and low loan-to-value ratio.
  • Loans given at comparatively higher interest rates.



  • Extremely low score due to continuous default in payments and multiple delinquencies in the past.
  • Very difficult to get an approval for a loan from any financial institution.
  • Credit report will include more overdue payments and write offs.

What does it mean if you score a 0 in your CIBIL score?

If you score a 0, it means that you have a very short credit history (of less than 6 months). Thus, there is very less information to get a precise score.

What does it mean if you score 1 in your CIBIL score?

A score of -1 indicates that you have no credit history.

A score of 0 or -1 doesn’t mean that a loan will not get approved. It just means that the bank cannot use your credit score as an accurate determinant to give you a loan.

What Are The Major Factors that Will Affect your Credit Score?

Your repayment History:

Your track record of payments indicates your financial history and ability to repay your loans.
Every default on payment, whether consistent or recent, will adversely affect your credit score. Even late payments, affect your track record. While, timely payments will increase your score.

Your capacity to pay back the credit:

If you manage to pay back a sizeable amount, it will have a positive effect on your credit score. But, Inability to pay back the amount will affect your score negatively.
Your debt-to-credit ratio is the amount of credit balance on your credit card compared to the credit limit allowed. If your debt to credit ratio is high then your score will be lower.

The percentage of secured loans to unsecured loans, you have:

A higher percentage of unsecured loans such as personal loans can reduce your CIBIL score. Having a mix in the type of loan will help to improve your score. Try maintaining a higher percentage of secured loans over unsecured loans.

Credit Hungry Behaviour:

To keep up with the standards of living and a ‘happening’ lifestyle, people spend a lot of money on clothes, accessories, food, etc. To finance these ever growing needs, people tend to use credit money and issue many credit cards. This ‘Credit Hungry’ behaviour of issuing more and more credit can weaken your score.

Here are a few tips to help you improve your Credit Score;

1. Know Your Credit Score!

If your previous loan application did not get sanctioned or if you have any uncertainty about your credit history, you should immediately:

  • Obtain a copy of Credit Information from the Bank for a fees of Rs. 50/-.
  • View your CIBIL score and Credit Information report on cibil.com for a fees of Rs. 500/-.

Knowing your score is important as it will give you an idea of how your credit history looks like. This is the first step towards improving your credit score.

2. Improve your Payment Record:

A bad payment history is one of the major reasons for a low score. In the future you should try to stay away from the following situations:

  • You have defaulted on part payment of your loan and the lender has written it off.
  • You could not pay off the entire loan and the lender settled, that is, he recovered as much as possible and closed the loan.

The most effective way to boost your credit score is to pay off all your existing loans, if you have any, before applying for a new loan. Avoid any default in payments. Try to pay your EMI on time, as late payments affect your score. I would recommend you to drop your cheque at least 5 working days before the due date. ‘Working days’ do not involve government holidays. So, make sure to eliminate the holidays while calculating your 5 working days.

3. Utilize Lesser Credit on your Card:

Credit cards are great financial tools as they provide you with instant credit. Credit cards can be highly beneficial if they are used wisely. If used irresponsibly, it can have a negative effect on your CIBIL score. It’s advisable that you avail a maximum of 75% of your credit limit. This shows that you are being prudent and acting cautiously, which has a positive effect on your score.
You should know that abstaining from using your credit card will not improve your score. If you do not have a credit history, you will not get a score.
Before closing your credit card account you should take an NOC from the bank, else it may reduce your credit score.

4. Strike a balance between Secure and Unsecured Loans:

A right ratio of secured loans to unsecured loans will positively impact your score. Unsecured loans are usually provided on depreciating assets such as automobile and credit card accounts. It’s better to go for a mortgage loan instead of unsecured loans as they have a positive effect on your credit score. Your credit ratio should ideally consist of 80% secured loans to 20% unsecured loans.

You can opt for a secured personal loan, which is usually given against the security of your fixed deposits. Instead of applying for an unsecured credit card, it’s advisable to go for a secured credit card. ICICI Bank, DCB Bank and Axis Bank are a few banks that issue secured credit cards in India.

5. Practice restrain on Credit:

Taking multiple loans and applying for many credit cards could be a a major reason for a low credit score!
Try not to approach multiple lenders for loans or credit cards. This could make you appear ‘Credit Hungry’, lowering your credit score. Abstain from applying for huge loans until you are financially fit and your score has improved. Hold off from taking fresh credit. Focus on paying off your older loans.

6. Having zero Credit makes you look risky:

Good credit histories can be a benefit to your credit score, implying good financial health. Not applying for any credit will make you appear as a risky target for Credit Institutions. So it may be a good idea to have at least one credit card in case you don’t have any loans against your name. This will surely help you when you apply for a home loan in the future.

7. Be cautious while becoming a guarantor of loan:

A guarantor is a person who provides a guarantee to the lender that he will honour the obligation in case the principal applicant defaults.
If you are made a guarantor of a loan by the principle borrower, and if he defaults on payment, make sure you pay off the loan on time. If you don’t, it will negatively affect your credit score.
You should make sure that the principle borrower does not default on payment.

CIBIL is not an organization that keeps a list of defaulters. It is just a repository of information and records. So if you have defaulted on your payments, don’t worry, there is always a scope for improvement!
CIBIL maintains your records for 7 years but displays monthly repayment history for the last 36 months. This means that a clean record post repayment of your old debts and prompt repayment of your new loans will guarantee a high credit score after a maximum of 3 years!

If still things do not work out for you and you cannot manage to improve your credit score, it’s not a dead end for your home loan! Here is some advice on how to get some alternative sources of loans – A Poor CIBIL Score is not a dead-end for your credit needs.


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