- CIBIL scores range from 300 to 900, reflecting credit history and borrower risk
- Banks prefer scores above 700; lower scores lead to higher rates or loan rejections
- Improving CIBIL scores requires timely payments, low credit utilisation, and error correction
Earlier this week, an Uttarakhand-based businessman complained that despite not having "any loan and no default", an adverse CIBIL score had effectively locked him out of the financial system since 2020. Ultimately, the Supreme Court stepped in to resolve the grievance of the man whose credit score remained "negative" for years.
There are several such cases pending in lower courts, highlighting how your ability to secure credit through traditional baking system is dependent on just metric -- your CIBIL score. Issued by TransUnion CIBIL Limited, one of the four RBI-licensed credit bureaus, a CIBIL score is a three-digit number (ranging from 300 to 900) that summarises a person's credit history and credit behaviour. The score reflects how responsibly you've used credit -- loans, credit cards, repayment history, and more -- and is a primary tool lenders use to assess your creditworthiness.
So, a high score signals lower risk to lenders, while a low score suggests a borrower may struggle to meet repayment obligations. In many cases, lenders may reject loan applications outright if the score is below their minimum threshold.
CIBIL Score Benchmarks
Banks have different minimum thresholds for CIBIL score to grant various loans. Here are approximate ranges used by banks and NBFCs:-
| Loan Type | CIBIL Score Range (Approx.) | Loan Approval Chances & Notes |
| Home Loan | 700-900 | Strong approvals above 750; below 700 may attract higher interest or stricter checks. |
| Personal Loan | 700-900 | Banks prefer 750+; NBFCs may lend down to 650 with higher rates. |
| Car Loan | 700-900 | Similar to home loans - 700+ preferred; 750+ ideal. (Industry norms) |
| Credit Card | 700-900 | Good scores lead to better limits and offers; low scores limit options. |
The Cost Of A Low Score
A low CIBIL score doesn't just reduce your chances of approval -- it affects the type of lender you can approach and the interest cost you'll bear.
State-run and large private banks often maintain stricter standards, preferring borrowers with solid credit history. When your score is low, these lenders may decline your application or offer loans only after extensive scrutiny.
If mainstream lenders won't lend, borrowers often turn to NBFCs or digital lenders, but these come at a price. NBFCs typically charge higher interest rates, shorter tenures, and may require heavier documentation.
This dynamic underlines why scores matter not just for loan sanction but also for financial cost and access.
How To Improve If CIBIL Score Is Low
Improving your CIBIL score is not a quick hack, but a process built on consistent financial discipline.
Pay on time, every time: Late payments are among the biggest score killers. Even a single missed EMI or credit card bill can ripple through your credit profile. Consistent punctuality is foundational. "The fundamentals may sound simple, but they require consistency," said Yash Agrawal, FMCG Entrepreneur & Amul Distribution Partner. In a similar vein, Ankit Modi, Managing Director of SalaryOnTime, said, "In the case of a score decline, individuals should ensure timely repayments and try to reduce outstanding balances."
Manage credit utilisation: High utilisation (using a large share of your available limits) signals higher credit stress. Aim to keep utilisation low - well below 30 per cent of available limits. Manish Bansal, Managing Director, SuryaLoan, stresses that a balanced utilisation ratio is key to a healthy score.
Avoid frequent applications: Multiple loan or card enquiries in short succession tell lenders you might be under financial stress. This can pull your score down. Suresh Kumar, CEO of Emergency Paisa, cautions against multiple enquiries, as they can hint at stress.
Check and correct errors early: Mistakes in your credit file - such as incorrect accounts or mistaken enquiries - can drag down your score unfairly. Regular monitoring and early correction prevent long-term impact. Pranav Koomar, Founder and CEO, PlusCash, highlights that errors by credit agencies can affect scores.
Build a healthy credit mix: A blend of secured loans (like home or car loans) and unsecured credit (credit cards, personal loans if used responsibly) signals diverse but well-managed credit behaviour. Senthil Kumar R, MD & CEO, Nitstone Finserv, points to a balanced mix as critical to sustaining a strong score.
Clear outstanding dues and restructure where needed: If your score has declined due to missed payments or heavy debt, focus first on settling overdue balances and then structuring credit more healthily. Gradually, this builds positive repayment signals. Taranpreet Singh, Partner, TASS Advisors LLP, says disciplined habits like clearing overdue EMIs can rebuild credibility.
How To Maintain A Decent CIBIL Score
Once you reach a good score, the goal shifts from repair to maintenance - but the advice doesn't change much:
- Keep paying all EMIs and card dues on time.
- Use credit judiciously; don't over-leverage.
- Check your credit report periodically to catch issues early.
- Avoid unnecessary loan applications - financial prudence signals stability.
- Keep older credit accounts open; account age influences score positively.
Senthil Kumar succinctly sums up this philosophy: "Maintaining a healthy CIBIL score is less about quick fixes and more about consistent financial discipline."
For entrepreneurs especially, it can be the difference between accessing growth capital and hitting a roadblock. As Yash Agrawal puts it, CIBIL score often shapes "business opportunities and growth".
Improving the score might take some time, but with discipline and awareness, lenders begin to see you as less risky. Wise handling of finances and responsible borrowing can restore trust and strengthen long-term credit health, says Suresh Kumar.
