Most of us think that is indeed a big task to get a loan sanctioned from banks.

Well yes, it is a lengthy process. But do you know what affects this process?

Your CIBIL score.

What Exactly Is a CIBIL Score?

A CIBIL Score is a three digit number which tells you the creditworthiness of an individual or a business.  CIBIL score is checked by lenders and credit institutions while evaluating our loan application.

The score ranges from 300 to 900. It is said that a score above 750 is considered a good CIBIL score. Scores below that benchmark  are usually considered low CIBIL scores by banks and financial institutions giving loans.

Why Do You Have a Low CIBIL Score?

1.Payment History

One of the factors that result in a low CIBIL score is our payment history.

Delays in payment in case of a loan or paying the minimum amount in case of a credit card bill will result in our score coming down.

If we default on our loan EMIs or make late payments, it amounts to bad credit and the score falls. If we default even once, it might also impact our CIBIL score.

If we are a regular defaulter, it will definitely impact our score adversely. Apart from all this, inconsistent and irregular payment will also have a bad impact on our credit score.

2. Multiple Loans

If multiple loans are taken by individuals like us at the same time, then our credit score is adversely impacted.

The reason for this is since we have applied for multiple loans at different banks, our debt burden increases and simultaneously our ability to repay them goes down.

This is a cause of concern for us as our CIBIL score gets impacted. It is true not just for taking loans but also for credit cards. If the number of the credit card along with the due amount goes up then it also impacts our loan paying ability.

3.High Credit Utilisation Rate

We have a belief that if we are paying our credit card dues then it will not impact our credit score but that is not true.

Even if we are paying our due amount in full within each billing cycle but are spending more than 45 to 50 percent of the total credit limit that has been sanctioned to us, it means that our credit utilization is considerably high and is resulting in bringing our score down.

This happens because we are taking a lot of our credit in paying our credit card dues, thus impacting our ability to pay the loans.

4. No Credit History

Bad credit history will definitely impact the CIBIL score of individuals like us.

But if we don’t have a track record of credit to show, then we won’t have a CIBIL score.

Hence, we can’t be assessed!

5. Wrong Mix of Loans

It is essential for us to have the right mix of loans in our credit portfolio.

The right mix of loan implies that we should have a right mix of secured and unsecured loans in our basket.

Just having unsecured loans is not good for our CIBIL score. Unsecured loans are those loans, for which there is no collateral given to the bank.

On the other hand, secured loans are those loans for which collateral is given to the bank in some form or the other for the loan taken from them.

In case we cannot pay the loan, the bank can encash the collateral by selling it and getting the required cash needed for clearing the amount owed to them.

Ways to Improve Credit Score

1.Paying Within the Stipulated Time

We should make sure that we pay our dues or a minimum amount on time to the lender.

Our credit history and hence our CIBIL score are adversely affected as a result of loan defaults. Apart from this, payment should be made consistently and on a regular basis.

Paying in time should be applicable not just for the loan taken, but also for the credit card payment. When paying loan EMIs, we should try to pay the entire EMI amount which includes both the interest and principal instead of paying a part of it.

2. Limited Credit

While taking loans, we should keep in mind that we do not take multiple loans at the same time. We should take loans in such a way that we are able to pay the EMIs apart from paying our regular expenses.

Managing day to day expenses along with the loan EMIs should be planned beforehand and accordingly.

Also, the loan amount should be restricted to our needs and unnecessary loans should be avoided at all cost in order to reduce our debt burden.

Right Credit Utilisation Rate

Right credit utilization rate can be maintained by taking credit as minimum as possible.

We should preferably avoid taking credit close to our sanctioned amount. This keeps the credit utilization rate under check and in turn helps in improving our credit score.


It becomes important for people like us to have a good credit record in order to get a loan when we need.

If we do not have a good track record it simply would make the entire process more and more difficult for us as we will not get the requisite loan amount when we need and thus our purpose of fulfilling loan will also not be accomplished.

So it is advisable to start avoiding the above-mentioned mistakes and follow ways which have been mentioned to maintain a healthy CIBIL score.

Disclaimer: The views expressed in this post are that of the author and not those of Groww