Is all the hype on credit score justified?

If one had applied for a loan a decade or so back, they would have required the relevant documents, knowing the bank manager or knowing somebody who knew the bank manager and could “introduce” the applicant. Knowing the manager or being introduced to the manager ensured that the lender knew about you being a reliable borrower or a trustworthy person which could not be established by simply looking at the documents. Lenders want to give money to those who can be trusted and this judgment was made in a subjective way in the past and often backfired. Things in today’s times have changed; now this “trustworthiness” or “creditworthiness” can be established in a more objective way; with the help of the credit score.

So What is a Credit Score?

Before focusing on the hype that surround the credit score and if it is justified or not we will try and understand what the credit score is. The credit score is a three digit number that reflects the creditworthiness and also the credit health of the individual. This rating is calculated based on the credit history of the individual; this history must be at least six months old and includes various aspects related to loans, credit cards and other credit behavior.

Based on five main parameters that are namely the repayment history, credit mix, credit utilization, inquiries and loan tenure the credit score is calculated. Amongst the five the repayment history is the most important parameter followed by credit utilization. These aspects are used to arrive at the credit score of the individual. The Credit Information Report which is a detailed contains a lot of information related to loans and the individual apart from the credit score.

Why is it Important?

So now we know how the score is calculated. So, why is it important? The score is important as it lets the prospective lender judge if the prospective borrower can be trusted or not. Let us start from the beginning. When an applicant applies for a loan, he/she submits an application along with the required documents. A financial institute will get hundreds of applications, they want to be sure that they lend the money to the right candidate, a person who can be trusted and is credit worthy. So how do they do this? This cannot be judged by simply look at the documents and the application form. This is what brings us to the credit rating.

The prospective lender will ask for the CIR of the applicant and based on the CIR the lender will decide whether to go on to the next step or not. The score is calculated based on the past credit behavior of an individual, thus the lender can make an assessment whether a person is likely to be a responsible borrower or not or is likely to default based on his past behavior and his current debt obligations.

Each financial institution will have its own set of rules and requirements when it comes to accepting a loan application or not. One of the criterions that the applicant has to comply with also concerns the credit rating of an individual. Thus those who have a score that is less than what is acceptable to the lender will not be sanctioned a loan, their application is likely to be rejected at the first step only. The acceptable credit score varies not only with the lender but also may differ depending on the loan type.

Generally a score of 750 is considered to be good enough to get a loan sanctioned. As per the statistics by CIBIL 79% of all loans sanctioned are to those people who have a score of 750 plus. If you are looking for a loan and have a score below this, it is a good idea to improve CIBIL score before you apply for a loan.

So is thy Hype Justified……

To clarify CIBIL or any other rating agency does not specify who should be given a loan or not, they just collect the data from various lenders and arrive at a score based on it. However, having said that almost all lenders look at an individual’s credit score before deciding whether to lend to him/her or not. Thus getting a loan or a credit card is heavily dependent on a healthy credit rating else your chances of getting a loan approved go down. Even if one were to get a loan with a low score it would be at higher interest rates. So yes the credit score is important and one must focus on keeping it healthy, not for the hype but for your own sake.


How Poor CIBIL Score Can Destroy Your Financial Goals?

You may not realize how poor CIBIL score can affect your life, but if you take a closer look you can see how it has the power to set itself as a major obstacle in several areas.

Here are a few ways how bad credit score can destroy your financial goals:

  1. Lack of Access to Money

Finding a loan for low credit score is harder than you think. Thus, if your life threw a curve-ball in the future and you need money on an urgent basis, things can become bleak easily. Most credit lending institutions perform a through credit check for every single loan application, and if you have a poor score it is highly unlikely that yours will get approved.

  1. High Interest Rates

Obtaining a loan for low CIBIL score is not impossible, but it comes with a catch- high interest rates. When the applicant has a history of CIBIL dispute  or lacks satisfactory CIBIL score then the lenders deem them as ” a high risk candidate”. To balance the risk they charge hefty interest rates for the personal loan, or any other kind of loan that they seek. This money paid in extra interest can be a lot, and thus make it difficult to manage the EMIs along with the monthly expenses.

  1. Job Risks

The importance of CIBIL score is increasing by the day in India. This is evident from the fact that more and more companies have started making it mandatory for the job seekers to have no history as a loan defaulter if they want to apply for jobs. SBI was one of the first to demonstrate this, when it mentioned clearly in the job advertisement that those candidates who had ever defaulted on a loan were ineligible for the posted jobs.

If you have a poor credit score then finding a good job can become difficult for you in the future. Even your existing job can be at risk if you default on a loan, as your company may look at it as a sign of bad money management and lack of responsibility.

  1. Increased Stress

Bad credit can rob you of joy in many ways. You start worrying constantly about your finances, and if you have a family to support then things can only become worse. Every time your phone rings you wonder if it is your debt collector. Paying with your credit card also starts making you nervous, as you pray that it doesn’t get declined when a seller swipes it in the machine. All this stress eventually forces you to seek professional help from a therapist of a doctor, which again costs you a lot of money, and you get caught in a vicious circle.

  1. Financial Limitations

Your finances can come under rigid constraints when your CIBIL score falls abysmally low. You have to limit your expenses in every possible way to get rid of the accumulating debt. Thus, unless something is really important, it has to wait until the debt is cleared. Home needs renovation? It has to wait. Car is broken? Need to use public transport for a while.

Needless to say, your quality of life takes a blow when your credit is not looking good. You can’t even apply for a new credit card, which could make things slightly easier for you, as for that too you need to have a good credit score.

Once you have understood the points mentioned above you can easily see why CIBIL score is important in your life. Even if you feel your score is good enough, you should never stop being careful with your debt payments. Missing one single EMI can have an impact on your credit report.  Plus, you can always improve credit score, if you know the basics of the same. If your score is already plummeting then it is best to get an expert to help you out. CreditSudhaar, for instance can provide you some of the best credit experts who can help improve your score in the smallest time possible.


5 Things you Should Understand About Credit Scores

Knowledge is power, and power is everything. Did you know that just the three digits that represent your credit score can have a huge impact on the financial well-being? If you have been overlooking news and articles related to CIBIL score and creditworthiness so far, then it is time to finally learn about it. The more you will avoid learning about CIBIL, the more difficult it will become for you to get loans and credit cards in the future.

So, here are top five things that you absolutely must understand about credit score:

free credit report1) CIBIL Score and its Importance

Your CIBIL score is a three digit score that is provided by Credit Information Bureau (India) Limited, the institution that collects and maintains records of every individual’s payments related to loans and credit cards. The score ranges from a  minimum of 300 to a maximum of 900.

2) Things That Impact Credit Score

There are a number of things that can affect your credit score, and thus should be given due attention to. These are:

  • Late Payments- Late loan payments, and credit card bills payments, are the most common reason behind low credit score. A lot of people don’t take payment deadlines seriously, believing that it won’t make a big difference. However, the reality is that every single payment is of significance when it comes to your credit score, and thus should be always taken seriously.
  • Mistakes in Credit Report- Your credit score is mentioned in your credit report(provided by CIBIL), which is also important. If there are any mistakes or errors either in your personal details or the payment history itself, that are mentioned in the report, then it could lower your score.
  • Remarks and Comments: The lenders from which you take loans can leave remarks in your credit report, which can be detrimental to your score if they show you in bad light. If this is the case then to improve credit score you have to request them to get them removed from your report.

3) You Can Get a Copy

The access to your CIBIL report is not restricted to financial institutions alone. You can get a copy of your report as well. All you have to do is create an account on CIBIL’s official website and submit a few documents for verification purposes. If all goes well then they will either send a report to your email address, or to your residence itself. You just have to pay a small fee for the service.

While getting a copy of your CIBIL report is an optional service, it is highly recommended so that you can keep an eye on the progress of your score.

4) Other Credit Information Companies

Although CIBIL is the authority bureau on credit management and regulation in India, there are  3 other bureaus as well that work on the same principles. In some cases your financial intuition could choose to consider turning to these bureaus as well apart from CIBIL, when considering your loan or credit card application.

Here are the 3 companies other than CIBIL:

  • Equifax: Established in 2010, the company scores individuals on a scale of 1 to 999, and is known for its new technologies and services.
  • Experian: It also scores on the scale of 1 to 999, but takes longer to provide credit report. It also offers the most cost effective means, by offering credit report for just Rs. 138.
  • Highmark: Highmark scores range from 300 to 850, and offers unique solutions such as data quality management, and credit assistance, etc. Since the company is relatively new it has some really innovative products for modern banks and other financial institutions.

5) Difference Between Free and Actual CIBIL Report

A lot of websites these days are claiming to offer free CIBIL report, when in reality they are just misleading the people. What most of these websites are offering is an estimate of your Credit Score, and not the actual credit score. If you want to improve CIBIL score then you must always refer to the actual CIBIL report, and not the rough estimates.

By being informed on your credit score and credit report, you can make sound financial decisions easily. The points explained above can be of great help in that enterprise.


I need a free credit report. What should I be doing

A credit report contains details about your credit history – loans, bankruptcies, credit accounts etc. The information in the report is used to generate your credit score, which is a three-digit numeric summary of your creditworthiness. Financial institutions will look at your credit report and credit score while making lending decisions. If you would like to view your CIBIL report, you would have to visit CIBIL’s official website and fill in their request form. The bureau will make available the report at a certain cost. It is important that you check your report at least two times a year to know where your creditworthiness lies. If you ever get the option to check free credit score from a legitimate source then do not let go of it.


At present, India’s credit bureau does not give out CIBIL reports for free. If you want to avail the report right this moment, you would have to pay a certain sum to avail it. However, recent news articles have suggested that the credit bureau is likely to begin providing individuals with one free credit report per year. The bureau is expected to begin doing so from January 1, 2017, news reports suggest. The central bank has said that the report must be provided on request, any time during the calendar year. Access to the free reports, which will be in the electronic format, is expected to raise consumer awareness and help people make more meaningful financial decisions. Now when you do avail a free CIBIL report, it is important that you treat it as a credit health management exercise. Many make the mistake of limiting themselves to checking on their report only before sending out a loan application. It is very essential that one regularly checks on his or her credit health so as to know where they stand financially.


If you want to check free credit score, visit the online website of Freescoreindia. Freescoreindia has joined hands with Credit Sudhaar to provide free credit scores in the country. In order to check free credit score from the website, you would be required to enter some basic information such as your name, email address, city and phone number. Once you have submitted all the necessary details and documents, your credit score will get updated to your online account in a span of 72 hours. You will also receive notification via SMS and email concerning the same. Finally, login to check free credit score.


It is prudent that you check your CIBIL report at least two times a year. Checking your report is the best way to know what needs improvement. If you plan on sending out a loan application, it would be a good idea to look at your report at least six months prior so as to make sure that no discrepancies have crept in. Regularly checking on your report will also help you realize whether or not you have fallen victim to identity theft. This is crucial given the rising cases of people falling victim to identity thefts. Additionally, staying updated about what your credit history looks like will help you set your financial goals.


Banks and other financial institutions will look at the contents of your CIBIL report to assess whether or not you are eligible for their loans. They will also determine the interest rates to charge you based on the conclusion they draw of you from your CIBIL report. If your score is low, chances are that lending institutions will charge high interest rates. Sometimes even employers will look at a candidate’s credit report to help them in their hiring decision. Landlords could also review your report when determining whether or not to rent to you. It is thus very important to keep track of the contents in your report and ensure that there are no errors of any sort. If you would like to check free credit score, we suggest you go through the website of Freescoreindia. If you come across other websites that will let you check your score or report for free, make sure it is authentic before taking things forward. Do not share yours personal details unless you are 100% certain that the website is authentic.


Can You Get A Credit Score From Your Bank?

Credit management is a big responsibility. The way you handle your EMIs and credit cards can directly affect your loan approval prospects in future. To ensure you are on the right track it is important that you keep a check on your credit score on a timely basis.

There are various ways you can get a credit score such as-

  • Your Bank- Some banks and even loaning companies do provide CIBIL score to their customers on a monthly basis. You can either check your score by logging in your account on their website or they may provide you the same on your monthly statements.
  • Credit Score Service Providers- Owing to the significance of credit score today many websites have emerged on the web that provide free CIBIL check online While some of these websites only provide you a rough estimate of your exact score by analyzing your credit history and payment patterns some of them do actually provide the exact score.
  • The Authority- There are different credit bureaus in India that can be approached for your credit score. These are CRIF High Mark Credit Information Services Pvt. Ltd. , Experian Credit Information Co. of India Pvt. Ltd, Equifax Credit Information Services Pvt. Ltd, and Credit Information Bureau India Limited. Out of these four 4 CIBIL is the most widely accepted one. Majority of banks are associated with CIBIL only and so if you want your credit report you can fill out a form on CIBIL website and pay a nominal fee. You will receive your detailed report along with the score.

There are many things that can hurt your credit score and inquires made on the same is one of them. Basically there are two types of inquiries- soft enquiry and hard enquiry. While the former doesn’t affect your credit score in any way the latter does so slightly.

Soft Enquiry- A soft enquiry is the one that is made by you. For instance, if you just want to check your score then you can get your report from CIBIL. This will be a type of soft enquiry. You can get your report any number of times you want but your score will never be affected.

Hard Enquiry- Hard enquiries are made by your lenders or banks when they have to make a lending decision. For instance, when you need a credit card then your bank will first make an enquiry to CIBIL to see if you have a decent CIBIL score. Only if they are satisfied with your report and score you will get your credit card. The problem with hard enquiry is that if your loan or credit card applications are rejected multiple times then your score will be damaged even though you are not obtaining what you seek(credit card or loan). Thus, credit management experts always recommend that you only apply for loans when you have a good score first.

Enquiries on your credit score should always be made with caution. Too many hard enquiries on your report could cause a lot of damage and make things even worse. If your bank doesn’t provide credit score to its customers it is best that you get your copy of report from CIBIL itself. You can also look for websites that offer the same. Just make sure that they don’t make a hard enquiry as that would be counter-productive.

How to Avoid Hard Enquiries?

If you are going to apply for a loan or a credit card you can’t dodge a hard enquiry. However, you can minimize the damage by apply for loans around the same time. For instance, if you are comparing different loans available in the market then it is better if you apply for them simultaneously. Chances are that CIBIL will recognize the pattern and understand that you are only trying to get the best deal possible. This should minimize the damage to your score. However, if possible you should apply for loans only when you feel your score is high enough to get an approval.

Should You Check Your Credit Score?

Credit score was something that was unheard till almost a decade and a half back.  Now it is not only discussed occasionally but it has become almost a necessity if one wants access to formal credit. If one were to approach any bank or financial institution for a loan the first thing that the prospective lender will do is get the applicant’s Credit Information Report (CIR). All financial institutes access the CIR when they want to assess a prospective client but you as an individual if you want to see how your credit health is or you want to know how to boost your credit score by looking at the grey areas in it then should you do it? Will checking you CIR have any impact on it? Is it a good idea to check your score? Well if you have any doubts the ensuing discussion is just for you.


Hard Enquiry V/S Soft Enquiry

To understand whether checking one’s credit rating impacts it in any way let us understand the difference between a hard enquiry and a soft enquiry. When a Financial Institution or a bank ask for the CIR of an individual it is known as a hard enquiry and as the chart alongside shows it has a 10% bearing on the score calculation.  When an individual checks his/her credit score then it is known as a soft enquiry and has no bearing whatsoever on the calculation. So checking your own score will not impact the credit rating unlike a hard enquiry; too many enquiries can impact the credit rating adversely. In fact one has the option of getting a free credit score also; you should check you score from time to time owing to the reasons explained in the following paragraph.


Why Should You Check Your Credit Score?

Now that we have established that checking your own score does not impact it negatively let us focus on why is it beneficial to check your own score periodically. Let us assume that you want to buy a new car during the coming festival season and you apply for a car loan; the loan application is rejected due to a low CIBIL score and you end up missing the special discounts.

Checking you score from time to time makes your prepared for a situation when you may require a loan in the future and beyond loans also if you apply for certain jobs. Yes! You read it correct a poor credit rating could hinder your job prospects too just like it hinders the borrowing prospects. Recently in their recruitment advertisement SBI had asked applicants to check their score before applying. If the rating is low due to some reason, being prepared in advance gives you sufficient time to try and increase the score and be ready to apply for a loan and a job too.

Accessing you CIR also gives you a comprehensive picture of your financial health. Thus beyond loans it could help you in financial planning and also course correction if you are too over leveraged, are late in making payments or there is some unpaid due which you have forgotten about. Looking at your credit report you get a summary of all your open loans, their remaining tenure and so on which can help you prepare for your future. Sometimes there may be an erroneous reporting in the CIR which may impact the score negatively although you might not be at fault. An occasional look at the CIBIL Score can warn you of such a situation and you can take timely remedial action.

So to answer the question asked at the start of this discussion; yes one should check their credit score. Checking you score in no way impacts it negatively; on the contrary it can help you by being prepared to deal with any situation and can also aid in financial planning.

How to Keep Track of Your Credit Score Easily

Your credit score is a benchmark number for your credit worthiness. The banks and financial institutions always request your CIBIL score details before accepting a loan or credit card application. If you have a good score between 750 to 900 points you are considered as a less risky prospect for granting a loan. Thus it is very important to maintain a good credit history and score.

In order to keep track of your credit score the easiest step is the first step. All you need to do is keep a track of your credit report. For this, simply check CIBIL score online for free time or make a quarterly schedule for the same. If you fail to study your CIR regularly, chances are you could be affecting your score unknowingly. Sometimes a missed-report by bank is enough to bleed the score. So keeping a track of the report ensures that you keep a track of all of your credit activities.

With credit report in hand you would know how many loans and credit cards you owe. You can easily calculate your income to loan ratio. Your credit percentage should always be 45 % or below the income level. If EMIs for credit card expenses and loans other than home loan total more than 25 % of your income you should consider it inappropriate. As long as you could maintain a manageable income to loan percentage you are less likely to fall into debt trap and miss the payment.

To maintain a decent score, it is mandatory to have a clear credit history wherein there is no lapse in repayment. Thus timely payment of loans and bills is one of the most important steps to add to your credit score.

Some tips to ensure timely repayment of balances-

  • You can try to put all your bills details handy in one place so that you don’t miss any of them ever. Use a computer excel sheet or maintain a journal for the purpose.
  • You can also consider to make a habit of paying out on a same day each month. This avoids least management of bill payments.
  • Always carefully note down the last due date for payment. It is a good habit to make payment well in advance rather than enjoying the last day ride.
  • Use an automatic payment via your bank account. This ensures regular payments. However you would need to make sure your account holds enough funds always. Check bounce can have a very negative impact on your score, so beware of this fact always!

When you study your report, be vary of any mistake in personal information or account information. Re check if all the credit related information is true. If there is an error, you should raise a dispute with the bank at the earliest. Also, never ignore an unidentified query or action on CIR.

Other than your repayment habits, your card plays a major role in maintaining a good score. As it is easy and convenient to use a plastic card for your day to day expenses, it is easier to increase CIBIL score with that card, provided you keep clearing the card balance before the due date every month. Unpaid credit bills and large card balances can heavily damage the score.


When you keep a good care of your credit score, you can be future safe for credit. Another way to increase the score is to keep your old credit card account with good history with you. Never close this card. Old card would not only grant a positive and longer credit history but would also emphasize on unrestricted repayment history. These two factors make you a desirable prospect for credit.


However you should not use your card for all expenses. For, your credit utilization would be very high in that case. You should instead use up to 30 per cent or lesser credit limit provided to you. This helps you maintain a healthy CIBIL score. Sometimes bank might offer you better credit limit on account of your good credit rating. Accept the increased limit as it will improve the credit utilization further and help your score. The increased limit should never be a means to increase the expenses.


Last but not the least, you should also pay attention to the accounts of the co-signors, joint account holders, or for the ones’ you signed as guarantor to. If any of these parties fail to repay they would directly damage your report as well.

All in all it is easy to manage the score if you follow these tips.

Why do people get free credit scores in developed economies?

The origin of credit scores dates back to the 1960s, prior to which when a lender extended a sum of money to a borrower, it was purely a judgment call. Since then however modern credit reporting has come a long way, with multiple credit bureaus operating both globally as well as in India. If you are even slightly curious about your credit score and what it entails, it is entirely possible that you would have availed of a score or credit report from one of the four credit bureaus (CIBIL, Equifax, Experian, CRIF High Mark) in India.

In developed economies such as the United States of America for instance, the scenario is different. With the levels of awareness regarding credit bureaus being high, the usage is also consequently high. The cost of reports being high initially, regulations that have been put into effect have made the availability of credit reports far easier and therefore free for most consumers. In India as of now, a mere 4 percent of the population is aware of credit reports, as per the findings of an exhaustive survey carried out by Credit Sudhaar, India’s premier credit health management company.

FSI wordpress

In the United States, the Fair Credit Reporting Act (FCRA) is enacted to promote credit information coverage and dissemination, which includes consumer credit information. An amendment to the FCRA, the Fair and Accurate Credit Transactions Act (FACTA) allows consumers to avail of a free credit report from each of the credit bureaus every twelve months. Hence owing to federal law a consumer is entitled to a free report.

Free scores in developed economies encourage users to keep track of their credit history, which makes managing your credit health significantly easier. This is because the credit history gives the consumer insight into their transactions, both past and present. It can also help reduce the instances of identity theft, as the consumer can report suspicious transactions to the concerned bureau immediately. Typically, most consumers avail of a free report every three months, owing to which they can check their credit report for the entire year basis the availability of these free reports. Currently in India, there is no such regulation and hence bureaus charge a consumer for a credit report.

However, in order to increase awareness and usage, websites such as are making an endeavour to provide free scores, to encourage individuals to understand credit scores better in India.


Self help on credit score improvement

Finding ways to scale up your credit score quickly? The first thing most loan seekers will do to get their applications approved is check their credit scores. A credit score is a definitive rating that every lender and creditor will assess before giving away money.

Here are 6 ways to improve credit score fast, all by your own understanding.

Self Help #1

Keep a close watch on credit card balances

If you have a smaller the percentage of your revolving credit, higher are the chances of improving credit score. You must plan to do a credit check every month to keep the balances at a minimum and pay down the balances before deadline set by the card provider.

Most issuers use the statement against your balance to report it to CIBIL. Checking CIBIL score online for free would reveal an astonishing fact- Irrespective of paying your credit card balances on time every month; you still could end up earning a whopping credit utilization rate.

Tip: Negotiate with the card issuer on terms that will allow you to make multiple payments in the same month.

Self Help #2

Avoid using multiple cards

One of the smartest ways to improve score fast is to eliminate ‘nugget’ balance against your credit card spending. Even a meagre balance across every credit card will reflect negatively in the credit check report.

First, never exceed the credit limit in any of the cards. Secondly, don’t use multiple credit cards to make a single payment. When you Check CIBIL score online for free, you can see how credit utilisation rate inflates with each use.

Tip: Avoid adulterating your credit report with too many sparse balances against multiple cards. Utilise the full credit limit in a card, and only then move to the secondary card.

Self Help # 3

Don’t remove old debts off your report

Most advisors recommend that you should not mention the events of previous debts in the report. As a self help, one of the generous ways to improve credit score fast is to leave the old debt records intact. If you have a respectable debt repayment record, the old debt will serve well in credit check made by lenders while your loan application awaits approval.


Just because you paid old debt should not be the reason you remove it from CIBIL report. Check CIBIL score online for free and ensure your older debt records are intact and accurately mentioned.

Self Help # 4

Don’t risk your score before a loan application

One of the worst things to do while improving your score is to make a hasty payment out of frustration. If you are not in a position to make payments in full, talk to the agency to extend the time limit. Do a credit check just after missing the scheduled date of repayment. If your request was processed, you might actually save your score from falling in the coming months.


Be on time when it comes to making payments. Use the calendar with reminders set for your payment schedules.

Self Help # 5

Report inaccuracies on your CIBIL Credit report

If you do a regular credit check online, you can easily find the negative information in the CIBIL report. Check CIBIL report online for free to investigate the number of enquiries made against your account and the reporting of bad debts. If you have been a clean borrower, this would help you improve credit score\. Though this is not one of the ways to improve credit score fast, it still saves you from shelling out money in finding legitimate help to safeguard your interests few months down the line.


Gather proofs against the incorrect information against your account, and improve your CIBIL report. It can be raised with CIBIL’s dispute platform.

Whether you are an individual or a corporate organization, doing a self-assessment on credit score improvement will help you earn loans quickly and probably at a lower interest rate.

How To Build An Excellent Credit Score Without Borrowing Money?

To enjoy easy credit tomorrow, it is a must that you have a good credit history and score today. But who says you need to borrow to build the score? It is a big myth. You need not fall into the debt trap for building a length of history. You can certainly build an excellent credit score without borrowing money. Here goes a simple 3 step process to build CIBIL score without a loan.

shutterstock_223493974Step 1:

First things first, understand how to check CIBIL Score. You need to fulfil following points:

  1. Pay all your dues on time. Being regular on your payments gives 35 % boost to the score.
  2. Keep your credit utilisation and loan to income ratio low. This adds up to 30 % to score.
  3. Have positive credit history. The age of your credit length also brings positive impact on score. It can help score up to 15 %.
  4. Have a right mix of secured and unsecured debts. It accounts for 10 % of your score.
  5. How frequently and recently you apply for loan also impacts your loan approval decision. This again holds 10 % weightage.

Once you achieve understanding on CIBIL Score calculation, your score tends to reach excellent levels.


Step 2:

Now as our goal is to avoid the debt trap, I will share a simple line of credit that will help you build credit history and that too, without borrowing! You can save borrowing decision for the rainy day!


If you guessed it, you guessed it right. It is your credit card.


Yup, you can use plastic money to your advantage and raise the score. To completely use the advantage, make sure you have a card that doesn’t charge you interest when you pay in full beforehand. Thus second step is to get a no interest credit card for building the score. You can compare credit cards offered by different banks online. As per your needs you can choose one.


Step 3:

We all have fixed monthly expenses such as mobile bill, TV connection bill, water bill, electricity bill and many more bills. All you have to do is pay one or more of these expenses through your credit cards month on month.


Say, you choose to pay your phone bill with a credit card. If you do so, every month you would build a balance on your credit card statement. By paying out the expenses in full by your card, you would technically repay the monthly outstanding credit on card. It is best to automate the process so that every month a timely transaction is fixed on your card.


This way you would build good history every month, without borrowing anything.


Next, note another point of advantage here. Say your credit card has limit of Rs 50,000. Your monthly telephone expense is Rs 1000. Now even if you set automatic payment method, every month you are using just Rs 1000 on the limit of Rs 50,000. This factors plays a very strong role in boosting your score.


The line of benefits do not end here. Not to forget the cash back and other add on benefits you get on credit cards. So you are not borrowing but getting paid to build your score!


Within a year or two, you would be able to reach excellent credit score just by being regular on your payments and not using much of the limit. However keep certain points in mind before you follow the above steps.

  1. Always be regular on your payment. Missing any payment would bring bad history, beware! The whole purpose of this exercise will fail if you miss the payment.
  2. Do not be co guarantor to a friend or relative. Remember you are saving your credit potential for future when you would apply for an auto loan, home loan or personal loan. If your co-applicant delays or defaults it would directly hurt your credit report. So do not take a chance by signing as a guarantor.
  3. As important is your credit score, as is your spouse’s score. It is always advisable to not reply on single member score in the family and ensure to build good score of your partner as well.
  4. Your score is not compulsively everything. Do not over burden yourself for 900 score target. If your score is above 750 it is considered as good score.


I hope now you would easily build an excellent score without borrowing money. All the best!