Effective Ways To Improve CIBIL Score:

Credit or CIBIL score serves as a useful criterion for determining an individual’s creditworthiness and current financial standing. It thus helps financial institutions to measure a business’s repayment capability and assists in making a lending decision. Individuals or businesses can hold a credit score between 300 and 900 as per their borrowing and repayment history.

Typically, a high credit score indicates a reliable borrower profile. This is why most financial institutions prefer applicants holding a high credit score over those with a poor credit score. 

Businesses with a high credit score are also more likely to secure funds at a lower rate of interest than those with a poor rating. Plus, it helps business owners strengthen their scope of loan approval. 

The decision regarding a good or a poor credit score during loan applications usually depends on the financial institution’s policies and discretion. Generally, a CIBIL score between 600 and 700 is considered to be favourable. Businesses with a poor score can also improve their creditworthiness by taking necessary measures that help improve their existing score.

If you are wondering how to improve CIBIL score, take a look at the factors and tips that help build the score.

Factor Affecting CIBIL Score:

Take a look at the table below to glance through the same –



Payment history 

It is the record of all debt payments made by a business till date. 

Amount of debt

The sum of money that the business owes towards the repayment of any loans or advances availed. 

Age of credit account

The period of the business’s credit history.

Credit mix

It comprises the debt mix availed, including both secured and unsecured borrowing. 

Record of loan applications 

The number of times the business has applied for a loan.

Tips To Improve Your Credit Score: 

Individuals can improve their CIBIL score significantly by following the below-mentioned tips – 

  • Pay Bills On Time:

Clean credit history can work in the favour of your business when it comes to availing a loan. Generally, failing to pay back a debt remains on the business’s credit report for up to 7 years. This hampers the chance of securing funding for working capital, thus hindering its flow of operations. 

However, your business can adopt the habit of making timely repayment of debts to leave a positive impact on the credit history, thus resulting in CIBIL score improvement over time. 

  • Maintain A Low Credit Utilisation Ratio:

Credit utilisation ratio represents the percentage of funds utilised from the total available credit and allows financial institutes to assess your repayment capacity. An ideal credit utilisation ratio is always less than 30%. Your business can thus maintain a low ratio in these following ways –

    • By paying its dues on time
    • Lowering credit card spending, if any
    • Increasing available credit card limit
    • Paying off existing debts before applying for a new loan
  • Do Not Apply For Multiple Loans Within A Short Span:

Applying for multiple loans often leaves several hard inquiries on the credit report, which harms credit score significantly. Typically, such a hard inquiry remains on a credit report for 2 years. Multiple loan applications also increase the chances of rejection and hurt your credit score. So, make sure not to apply for multiple loans, and opt for a funding option that carries a high chance of approval.

  • Start A Credit Account With Suppliers:

If your business often resorts to vendor financing, you can consider establishing a credit account with the suppliers. The business’s credit profile would thus record positive payment experiences and help improve the credit score over time. 

  • Check And Rectify Mistakes In the Credit Report:

Incorrect or delayed information updates often hurts a business’s credit score. You must thus make sure that the financial information recorded on your business’s credit report is correct. Staying updated of the credit report records helps to identify incorrect or delayed information, for which you can request a rectification at the earliest.

Other than these, you can also lower your credit EMI by choosing longer repayment tenure for a positive impact on the score. One must also know that it can take up to 6 months for these changes to reflect in the CIBIL score. It is thus best to take the corrective actions well in advance.

Frequently Asked Questions:

A. Business owners can check their CIBIL score for free by - visiting CIBIL’s website and submitting necessary details like personal information, PAN details, etc.