Well, first off, I would bump ISO much more. When it comes to ISO, there are trade-offs, however one of the worst ones to make is not bumping it up enough! Exposure is a factor of three primary variables, and ISO is just as important as the other two (shutter and aperture.) The consequences of not using enough ISO quite often result in a noisier photo, as you usually have to increase exposure using post-processing, which can enhance noise more than boosting ISO.
You should always aim to expose correctly, regardless of what settings you need to adjust to do so. Generally speaking, you should aim to get as much light down the lens as you can. Increased ambient lighting, flash, opening windows/doors to let in more natural light, etc. can all assist in that endeavor. Sometimes its just not possible to produce enough light, or light of the necessary quality and angles. If you are shooting indoors, don't have an ultra fast lens (i.e. f/2.8 is your maximum aperture) but need one, need to use a narrower aperture than is ideal for deeper DOF, have to use a longer shutter speed to minimize motion blur or camera shake, etc., then increase ISO. You'll generally see some increased noise, simply as a matter of the physical properties of light. But the alternative is to underexpose your photos, which diminishes saturation and contrast, and ultimately leads to higher noise in an exposure-corrected image (sometimes a LOT higher.)
Use ISO 200, 400, 1600 or even 6400 if you have the option, if thats what it takes to get a correct exposure in-camera. If you can, try to
expose to the right (ETTR), a technique where you shift the in-camera histogram of your photos as far to the right as you can to maximize the amount of light captured. When using ETTR, make certain you are not clipping your highlights (most modern digital cameras have an option to blink clipped highlights when previewing images). You can correct any overexposure down in post-processing, which can often reduce the amount of visible noise that may be caused by a higher ISO.