CIBIL Score: Tips to improve credit score after loan default (2024)

CIBIL Score Check Report:Lenders, banks and NBFCs, keenly watch the credit score of an individual before lending money. In India, CIBIL or Credit Information Bureau (India) Limited is the most preferred credit report. This is why CIBIL plays a very important role when someone is applying for a secured or unsecured loan. But there are numerous instances or common mistakes that result in a drop in your CIBIL credit score. Improving your CIBIL score after default is a daunting task, but it is possible.

According to Radhika Binani - Chief Product Officer, Paisabazaar - not paying the EMIs of your loan or outstanding credit card bills past the due date, especially over a long period of time, is detrimental to your credit score and till the time you pay it off, your credit score will continue to decline sharply and is likely to fall to a poor score over time.

"Also, as long as you have outstanding debt, it’s unlikely any lender would provide you with any form of credit," she said.


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According to Amit Gupta - MD, SAG Infotech - a low CIBIL score indicates that you are a high-risk borrower and it can affect your ability to get new credit.

Tips to improve CIBIL score

Fortunately, there are steps you can take to improve your CIBIL score after defaulting on a loan or credit card payment.

The first and foremost step towards improving your credit score after defaulting on one or more repayments is to clear your outstanding dues completely. The earlier you do this, the better.

"But remember, clearing your dues is different from settling your credit account. Some lenders may accept a one-time part-payment to settle your dues. In this case, the loan account in your credit report will reflect “settled” not closed. This essentially means that you were unable to repay the full outstanding amount. A “settled” loan account is a sign of high risk for lenders and you are unlikely to get any form of credit in the near future," Binani told Zee Business.

Keeping your credit utilization low is also a key factor to improve your credit score.

"Aim to keep it below 30-40 per cent of your available credit limit. And finally, don't apply for too much credit. Every time you apply for a loan or credit card, a hard inquiry is placed on your credit report. Too many of these can have a negative impact on your score, so try to limit the amount of credit you apply for," Gupta said.

Binani also advised people to improve their repayment records by paying all credit card bills and EMIS in full and on time every time.

"If you do not have any active credit account, you can take a secured credit card and use it wisely to improve your repayment record. But do remember, any significant improvement in your credit score will take time," she added.

How difficult is it for people with negative credit score to get a loan?

An applicant’s credit history is one of the most important factors for any Bank or NBFC when they process his/her loan or credit card application.

"If the credit score is low or the credit report shows poor behaviour with credit, like regular delays or defaults on repayments, outstanding dues past due date, multiple credit applications within a short span of time, most lenders are likely to reject the loan application," the Chief Product Officer of Paisabazaar said.

CIBIL Score: Tips to improve credit score after loan default (2024)


CIBIL Score: Tips to improve credit score after loan default? ›

Paying your accounts regularly and on time will improve your score as you build a credit history. Missed payments, defaults and court judgments will stay on your credit report for six years. However, the impact of any missed payments or defaults will likely reduce as the record ages.

How do I build my credit score after default? ›

Paying your accounts regularly and on time will improve your score as you build a credit history. Missed payments, defaults and court judgments will stay on your credit report for six years. However, the impact of any missed payments or defaults will likely reduce as the record ages.

How can I remove default loan from CIBIL? ›

You will have to obtain a No-Objection Certificate (NOC) from your bank post the payment of your dues in order to get your name removed from the defaulters list.

How can I improve my CIBIL score after overdue? ›

Steps to Improve CIBIL Score After Settlement
  1. Build a Good Credit History. ...
  2. Convert Your Account Status from 'Settled' to 'Closed' ...
  3. Pay Your Dues Regularly. ...
  4. Clear Any Outstanding Dues. ...
  5. Get a Secured Card. ...
  6. Keep Available Credit Limit Above 50% ...
  7. Do not Apply for or Enquire About Loans. ...
  8. Continue to Utilize Credit Cards.

Will CIBIL score increase after loan closure? ›

Ans. If you repay your loan in full and close the loan account on time, it has a positive impact on your CIBIL score as it shows a higher creditworthiness and good repayment behaviour.

Will my credit score go up if I settle a default? ›

Your credit score will improve gradually as your defaults get older. This doesn't speed up when you repay a defaulted debt, but some lenders are only likely to lend to you once defaults have been paid. And starting to repay debts makes a CCJ much less likely, which would make your credit record worse.

How much will credit score increase after default removed? ›

Put simply: removing one default from your Credit Report won't make much of a difference if you have additional defaults remaining. Only when all negative markers on your Credit Report have been removed will you begin to see any real improvement in your Credit Score.

Can we delete CIBIL history? ›

How can I delete my CIBIL history? The first step is to pay the full amount of your debt and then obtain clearance from your bank. After paying your dues, you must obtain a No-Objection Certificate (NOC) from your bank in order to be removed from the defaulters list.

What should I do if my loan is in default? ›

If you've already reached default status on a loan or credit card, here are some steps you can take to minimize the negative impact: Try to negotiate a settlement. You may be able to negotiate with the lender or collection agency to settle for less than what you owe.

Can I purchase cibil score? ›

Buy your CIBIL Score and Credit report. This will cost you only Rs. 550/- and you can have access to the credit report within 3 business days. Follow the below step by step process to understand your report and identify areas to improve on.

How many months does it take to improve cibil score? ›

The time taken to improve the CIBIL™ score can normally be around 4-12 months, depending on your consistency in reflecting good credit behaviour. A credit score close to 750 is considered good and it will take lesser time to further improve such a credit score.

How can I increase my cibil score from 500 to 750? ›

How to Increase Cibil Score from 500 to 750
  1. Lowering Credit Utilization Ratio.
  2. Avoiding Closure of Older Accounts.
  3. Improving Payment History.
  4. Monitoring of Credit Reports.
  5. Multiple Credit.
  6. Avoid Inquiries about Credit Cards.
  7. Pay EMIs on Time.
  8. Always Pay the Complete EMI Amount.
Jul 17, 2023

How can I improve my credit score after paying off debt? ›

Following several guidelines can help you improve your credit scores and keep them strong:
  1. Pay off your loans on time, every time.
  2. Don't get close to your credit limit.
  3. Establish a long credit history of making payments on time.
  4. Apply only for the credit you need.
  5. Check your credit reports for errors or inaccuracies.
Jan 29, 2024

How long does it take to build credit after default? ›

How long does it take for your credit score to go up?
EventAverage credit score recovery time
Missed/defaulted payment18 months
Late mortgage payment (30 to 90 days)9 months
Closing credit card account3 months
Maxed credit card account3 months
3 more rows
Jul 27, 2023

How many points does a default affect your credit score? ›

A missed payment on a bill or debt would lose you at least 80 points. A default is much worse, costing your score about 350 points. A CCJ will lose you about 250 points.

How can I improve my credit score with a delinquent account? ›

Making your minimum payment on time each month is the best thing you can do to rebuild your credit. Timely payments account for 35% of your FICO credit score. And while that delinquency will stay on your record, every month you have a timely payment it's impact will be reduced.

Do I still have to pay a default after 6 years? ›

If there is a default against a debt, then the whole debt will “drop off” your file after six years, even if you haven't repaid the debt. With no default, the record will not go away until six years after it is marked as settled/satisfied in some way.


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