Credit Information Bureau (India) Ltd (CIBIL) is a credit information company that gathers the financial and credit payment history of individuals or businesses from banks, NBFCs, and other institutions on a monthly basis. The three-digit CIBIL score ranges from 300 to 900, and a score of 700 and above is considered good. According to Zee News, keeping a strong credit score may significantly improve your chances of loan acquisition, as how well you maintain your credit score signals lenders about your ability to pay them back on time. The score is gauged by your financial stability and creditworthiness over time, depending on your ability to pay back borrowed money on time.
There is a common misconception among first-time borrowers that having a high salary automatically translates to a strong credit score. Credit scores are not directly linked to an individual's income but instead reflect how responsibly a person manages debt and repays their obligations. As explained by Raj P Narayanam, Executive Chairman of Zaggle, a credit score measures repayment behavior, not earning capacity. A high-income professional who pays bills late or carries high credit card utilization can have a surprisingly poor score, while a salaried employee with modest income but disciplined repayment habits can command an excellent one. According to Zee News, the wealth one possesses is not an indicator of creditworthiness—instead, how well a person manages their finances, how punctually repayments are done, how long a card is used, and ensuring the credit limit is not crossed builds one's reputation as a reliable borrower.
Pay your bills on time: Set reminders and keep a note of payments to be made. Late payments can reflect poorly on your credit history; late or missed payments can ruin an otherwise good credit score. Maintain a long credit history: Having a strong and long credit history makes it easier to get a loan. To maintain a lengthier history, try to keep your old credit card for as long as it helps in making timely payments. A longer history helps ease loan approval, since lenders deem you a more responsible borrower. Conversely, regularly applying for new cards can shorten your history, thus reducing your score. Manage your credit utilisation ratio: Keep a check on your credit utilisation ratio and enhance your credit limit when needed, as per your expenses. It is better when your card usage is well below the limit, since keeping your expenditure at the edge of it can negatively impact your reliability as a borrower.
Choose longer loan tenors smartly: Choosing loans with a longer tenor can be a smart move to maintain a good score, since the EMI is usually lower. A low EMI is easier to pay, thus helping you make repayments on time. This builds up your credit score and indicates your financial stability. Avoid taking multiple loans simultaneously: Taking multiple loans at once indicates a lack of funds. It is better to apply for a new loan only once you have made the complete repayment of your previous one. Monitor your credit report for errors: Keep a check on your credit score and look for discrepancies. Your credit report notes your balance, credit accounts, repayment information, and inquiries made by lenders. If you find any incorrect amount due, a delayed payment record, or any other wrong entry, submit a CIBIL dispute resolution form. As reported by Zee News, building a strong credit score takes time—it is better to inculcate these habits into your financial discipline instead of waiting for a loan application to be rejected when you are in need of money.
For professional investors, a credit score serves as more than a number—it is a tool for optimizing the Weighted Average Cost of Capital (WACC). Borrowers with top-tier scores can access 0% APR introductory offers on credit cards, enabling a form of interest-rate arbitrage where the borrower uses the 0% line for short-term liquidity while keeping their own capital deployed in higher-yielding assets. While broker-dealers use specific internal metrics for margin accounts, general creditworthiness often influences the terms available for portfolio margin or Lombard loans. A pristine credit profile provides the leverage needed to optimize a portfolio without triggering premature liquidations during periods of high volatility.
