In India, when someone talks about their CIBIL, they are talking about their credit score. TransUnion Credit Information Bureau (India) Limited (CIBIL for short) is just one Credit Bureau in India that is authorized by the Reserve Bank of India (RBI) to collect and analyse credit-related data of an entity or individual. The other three credit bureaus licensed to operate in India are Experian, Equifax and CRIF High Mark.
As each bureau has a different method of analysing your credit data, your credit scores may vary across bureaus, and each lender has their preferred bureau that they depend on to assess their customers’ creditworthiness. But there is one thing all credit bureaus have in common – lenders tend to prefer lending to customers who have a high credit score and no default on their credit report. This means having a good credit score, regardless of the bureau is important.
When you apply for a business loan with CreditEnable, we do a soft pull of your Experian report to check your eligibility with our lender partner credit requirements. This soft pull has zero impact on your credit score and helps us save you time and stress by telling you upfront whether your business will qualify for a business loan with one of our 25+ lender partners.
What is a Credit Score?
Your credit score is a three-digit number that lenders use to help them assess how likely you are to repay a business loan and repay it on time. The higher your score, the more likely you are to qualify for a business loan and credit cards at the most favourable terms, which will save you money.
How Can You Improve Your Credit Score?
If your credit history is not where you want it to be, you’re not alone. Improving your credit score takes time, but it is not impossible. The sooner you take action to address the issues that might be dragging your score down, the faster your credit scores will go up. Below are some steps you can take to improve your credit score:
1. Pay your bills on time
When lenders review your credit report and request a credit score for you, they’re interested in how reliably you pay your bills. That’s because past payment performance is usually considered a good indicator of future performance.
You can positively influence this credit scoring factor by paying all your monthly bills on time as agreed. Late payments or settling an account for less than what you originally agreed to pay can negatively affect credit scores.
If you’re behind on any payments, bring them current as soon as possible. Although late or missed payments appear as negative information on your credit report for seven years, their impact on your credit score declines over time: Older late payments have less impact than more recent ones.
2. Maintain low utilization on your credit cards
Your credit utilization ratio is another important number in credit score calculations. It is calculated by adding all your credit card balances at any given time and dividing that amount by your total credit limit. For example, if you typically spend about INR 2,000 each month and your total credit limit across all your cards is INR 10,000, your utilization ratio is 20%.
Lenders typically like to see low ratios of 30% or less, and people with the best credit scores often have very low credit utilization ratios. A low credit utilization ratio tells lenders you haven’t maxed out your credit cards and that you likely know how to manage your credit well. You can positively influence your credit utilization ratio by:
Apply for and open new credit accounts only as needed
Unnecessary credit can harm your credit score in multiple ways, from creating too many hard inquiries on your credit report to tempting you to overspend and accumulate debt.
Don’t close unused credit cards
Keeping unused credit cards open, if they’re not costing you money in annual fees, is a smart strategy because closing an account may increase your credit utilization ratio. Owing the same amount but having fewer open accounts may lower your credit scores.
Don’t apply for too much new credit, resulting in multiple inquiries
Opening a new credit card can increase your overall credit limit, but the act of applying for credit creates a hard inquiry on your credit report. Too many hard inquiries can negatively impact your credit score, even though this effect will fade over time. Hard inquiries remain on your credit report for two years.
Since hard inquires remain on your credit report, when you apply for a business loan with CreditEnable, we only do a soft pull of your Experian report to assess your eligibility for a business loan. A soft pull made by us is similar to a soft enquiry you make about your credit score, which is not recorded on your credit report since it was not made by a bank or an NBFC and therefore has no impact on your credit report. Apply for a business loan with CreditEnable today.
3. Dispute any inaccuracies on your credit reports
You should check your credit reports regularly to catch any inaccuracies. Incorrect information on your credit reports can drag your scores down. Verify that the accounts listed on your report are correct. If you see errors, dispute the information, and get it corrected right away. Regularly monitoring your credit can help you spot inaccuracies before they can do damage. Read more on why you should check your credit report regularly here.
Improving your credit score is not something you can do overnight. It takes people months, sometimes even years, to improve their credit score, and therefore their attractiveness to lenders. By following these simple practices, you can improve your credit score or maintain your current positive credit score.
Want to know more about your business credit report? We broke it down for you here.