Why does my CIBIL Score remain constant? I am paying my credit card bill duly and have never taken excess credit: I have repaid my loans successfully, yet whenever I check, my score hovers around the 720 points mark. How can I increase my CIBIL Score?

This is a familiar scenario for many who feel they are doing everything right yet not being rewarded, with their rating showing an upward trend.

To understand the CIBIL Score trend, we first need to examine how the CIBIL Score is calculated, what algorithms are used and how they affect your current rating.  Let us study the significant inputs:

The Previous Credit History: Your record from the first time you got a credit card or applied for a consumer loan will reflect in your data. The repayment track of all the Personal Loans or Home Loan EMI paid, timely or with delays, is all mentioned in the history.

Your payment history forms the basis of your CIBIL Score points contributing towards a successful history include an extended length of credit track, the number of credit lines you have used, and an on-time payment record.

All the credit used should be repaid and closed successfully any credit cards or personal loans settled will be reflected in your CIBIL and bring down your score.

A 30% CIBIL rating is allotted to your previous credit behaviour.

Credit Type and Duration: Type of credit means secure loans like home loans, Auto loans, Loans Against Property and consumer loans, where funds have been given against a mortgage and unsecured loans such as credit cards and Personal Loans, which are collateral-free.

A good mix of credit is one in which the individual uses a judicious mix of secure and unsecured credit.

A credit card with a good vintage, which is in regular usage or a personal loan that has been repaid over the allotted tenure is proof of the customer’s responsibility towards repayment of credit taken and builds lender confidence; a home loan with a longer repayment tenure indicates the capacity of the borrower to sustain long-term payments and consolidate assets. The type of credit used and duration comprise 25% of your credit score.

Credit Exposure: What is the quantum of credit which you have availed? Has the ratio of credit used increased with the increase in income over time? Your credit exposure is evaluated according to the percentage of credit you use compared to your income. This section contributes to another 25% of your credit rating.

Ideally, you can allot 50% of your income towards credit repayment per the eligibility criteria and the balance for lifestyle expenses or building assets. Banks allow this ratio to increase as your income increases depending on the EMI Calculation.

For example, suppose you have used credit conservatively with a home loan and a credit card, which is used rarely. In that case, you will have a mediocre CIBIL rating, which can also limit the chances of getting enhanced loan amounts if required in an emergency. Lenders need proof and be assured that you can meet the challenges of handling your credit and making timely payments.

You can uplift your score by working on your current credit exposure: activate any dormant credit cards by using them for regular spending, like filling fuel in your vehicle, eating in restaurants, spending on travel expenses by paying hotel bills and air or rail tickets and paying your bills as per the payment cycle due date.

Go in for a consumer loan rather than paying cash when purchasing household items; many stores offer further discounts on credit or debit card payments.  Ask for an increase in your credit card’s spending limit. Using unsecured credit like a Personal loan will help increase your CIBIL rating quickly.

Your credit exposure over time and current usage influence 25% of your score calculation.

Besides the more significant inputs considered, other influencing factors include the following:

CIBIL Errors: The Credit Bureau of India Ltd (CIBIL) is a non-government credit rating agency aggregating consumer borrowing and payment information. The Reserve Bank of India has authorised it to collect data from financial agencies, grade the same, and allot ratings based on borrowings and repayment information.

Consumer data is tabulated according to personal details, including name, PAN numbers, mobile numbers, employment details, residence address, and bank account details: a unique control number is further allotted to the customer. Although the information is verified, and the chances of an error are minimal, they could happen.

It is our first-hand experience that CIBIL mistakes happen, and when a customer is informed about being denied a Personal Loan request due to an aberration in the CIBIL, it comes as a surprise.

On closer investigation of the CIBIL record, it is found that a wrong entry has been recorded. There are chances of a wrong admission on behalf of the financer, and if the applicant’s details are wrongly entered, the CIBIL can update the incorrect information.

A CIBIL entry showing credit not used by the customer or a mistake in the repayment track can be rectified by raising a dispute with CIBIL as follows:

• Visit the official site of the CIBIL credit bureau.
• Click the Dispute Resolution tab and fill in the form with the required information.
• CIBIL will verify the dispute with the financer.
• The resolution will be updated within 35 to 40 days

The score will be revamped once the resolution is applied to your CIBIL history.

Ask for your CIBIL details and study the data entered. Are there any omissions or errors which are affecting your rating? Rectification of the same will help increase your score.

Pending Credit Lines: After the complete repayment of a loan or the closure of a credit card, it is advisable to procure a closure letter from the lender to substantiate the transaction. Any pending dues will be updated in the CIBIL: an individual may be unaware of these dues, which, left unpaid, can multiply and downgrade the CIBIL Score.

Checking your CIBIL Score every six months will keep you updated on any transactions you might have missed and alert you to any dues. If there are any dues, clear the same and inform the lender to rectify the same. Settling any balance payments could boost your CIBIL to the required score if you need to Apply for an Instant Personal Loan.

In conclusion, Leading Banks like HDFC Bank and ICICI Bank require a minimum of 730 points as a CIBIL Score to issue further credit. If your score is lagging, take note of the pointers listed above to help you decipher the reason and take action as recommended.

With extensive credit usage as a norm, consumers know the importance of maintaining healthy credit and make it a point to keep their scores on track. Regularly checking, maintaining active use and timely repayment are ways to achieve an optimal score.