Improving your credit score isn't easy. More often than not, it takes months if not years to reverse the damage. This is the reason why the majority of credit experts strongly emphasize on developing good credit habits in the first place.
If you are tired of looking for a loan with bad CIBIL score and want to improve your creditworthiness, then chances are you have already found out a variety of ways to go about it. If one of these is "diluting" your bad credit with good to make an overall improvement, then you are at the right place.
There is no right answer to this question. This is because unlike report cards, in which you can make an overall improvement by scoring well in some of the exams to make up for the poor performance in the rest, there is no guarantee that it will happen in your free CIBIL report as well.
An academic report card is pretty straightforward. Your overall score is affected by your performance in every single examination, as it's the average of all. However, credit reports are created differently. For starters, different credit rating agencies follow a different calculation method for the scoring and may give the highest priority to some factors over others. Some agencies are also more stringent than others and may ignore your efforts to improve your credit score with good debt.
Now, it would be wrong to say that you can't improve your credit report with good credit at all. Positive results are often observed in long-term, so you definitely should give it a shot.
If you want to improve your creditworthiness, the most important thing that you can do is get the bad debt removed from your credit report.
If you have defaulted on a loan in the past, then that can be the biggest factor to bring your score down. However, most banks are reluctant to have it removed because of the seriousness the act bears. That said, it's not impossible to get it removed.
You can start with becoming more careful with your credit management. For instance, you can start paying your bills on time, keep credit utilization low with your credit cards usage, etc. If you are able to develop a good reputation for credit management, then you can approach your bank and request them to remove the bad remarks from your credit report. These include late payments, loan defaults, settled accounts, etc.
There are a few other things that you need to be careful about as well if you don't want to apply for a loan with bad CIBIL score:
Your oldest bank accounts and credit card accounts are of the utmost importance when it comes to credit score calculation. So, unless you absolutely have to, you should keep these accounts open. If you have “too many” accounts, then consider closing the one that’s the most recent.
Don't be fooled by the convenience of the "minimum payments" offered with the credit cards. Although you can make a minimum payment (1% or 2% of the balance) every month, it can lead to debt accumulation.
You don't want your debt to increase if you want a healthy credit score. So, make it a point to always pay your credit card bills in full.
Just like minimum payments, late payments can also have an adverse effect on your credit profile. In fact, by paying your EMIs and credit card bills on time on a consistent basis alone you can make a huge improvement in your credit score.
The majority of credit rating agencies give the highest importance to the repayment history. So, always pay your bills on time even if you have to borrow some money from your family occasionally.
To sum it up, "yes" it's possible to dilute bad credit with good credit for an overall improvement.