Essential Steps to Boost Your Credit Score Prior to Seeking a Personal Loan
In India, a credit score ranging from 300 to 900 plays a crucial role in determining one's financial opportunities. An excellent score, above 750, is highly valued by lenders like HDFC and SBI, as it signifies a borrower's trustworthiness in repaying loans.
To improve a low credit score and secure a personal loan at a lower interest rate, it's essential to prioritize consistent payments, maintain a healthy mix of credit types, and manage debt effectively.
Timely Payments
Always pay loan EMIs, credit card dues, and bills on or before their due dates. Setting up reminders or automating payments helps avoid penalties and negative credit impacts.
Debt Management
Lower your credit card balances and other unsecured debts to reduce your credit utilization ratio, which lenders watch closely. Aim to use less than 30% of your credit card limit to maintain a healthy credit profile.
Credit Mix and History
Maintain a good balance between secured (e.g., home loan) and unsecured loans, and keep old credit cards active to build a longer credit history.
Limit Loan Applications
Avoid multiple loan or credit card applications in a short time period to prevent multiple hard inquiries, which can reduce your score. Waiting at least six months between loan applications can help keep your credit score stable.
Credit Report Monitoring
Regularly check your credit report for inaccuracies and dispute any errors to prevent unjustified score reduction. Approximately 119 million Indians had monitored their CIBIL scores as of March 2024. Fixing errors in your credit report can improve your score by up to 100 points for missed payment errors, 70 points for closed loans still open, 50 points for wrong account details and duplicate loan records, and 30 points for incorrect credit limits.
Alternative Options
If your score remains low (below 685), consider loans from NBFCs or fintech lenders who evaluate additional factors like income, or apply with a co-applicant/guarantor or via collateral to improve approval chances.
Improving your credit score is a gradual process, often taking at least 6 months to reflect meaningful change, but these disciplined financial habits will help secure personal loans at lower interest rates over time.
Sources:
- Bajaj Finserv Markets, "How to Improve CIBIL Score" (2025)
- Tribune India, "3 Simple Ways to Improve Your Credit Score" (2025)
- 5Paisa, "How to Increase CIBIL Score" (2025)
- Bajaj Finserv, "Personal Loan for Low CIBIL Score" (2025)
To effectively manage personal-finance and improve the chances of securing better investing opportunities in the future, it's crucial to focus on debt management by lowering credit card balances and maintaining a low credit utilization ratio. Additionally, maintaining a healthy mix of credit types, such as secured and unsecured loans, will help strengthen one's personal-finance profile and increase chances of getting loans at lower interest rates.
