Improve a Bad Credit Score
Every bank or NBFC has a different criterion to issue loans. The list of this criterion may vary. Now the RBI has mandated the financial institutions to check the CIBIL score of each applicant before giving a loan.
CIBIL score is a credit score that records all the information related to loans and credit cards of a person. The score ranges from 300 to 900. A score of more than 700 is considered good and the banks do not consider a score below this. A score of more than 750 is really good and is mostly accepted.
There are a few factors which affect the CIBIL Score:
- History of the payments.
- Number and frequency of payment defaults or delays.
- The total amount of debt held at any point in time.
- Types of credit that a person has availed e.g. personal loans, car loans, credit cards, etc.
- Utilization of credit limit i.e. the amount of available credit already used.
A credit score is really important and it becomes really important if the score is bad. It just can’t be ignored. Keeping a good score is really important to get approved for a loan. And if the score is already bad then it needs to be corrected as soon as possible. There are a few quick fixes:
First, eliminate the credit card balances if any. Keep a check on your spending. Spend only that much using a credit that can be paid in the current billing cycle. If there is any unpaid balance then talk to the bank and try to negotiate a deal to close the loan account.
Unpaid dues and large balances on credit cards pull the score down. Paying these debts will give a positive effect on the credit score. And if possible keep only a few credit cards maybe 2 or3. This keeps it easy to keep track of the payments.
Whenever anyone checks a CIBIL score, reviewing the credit report is really important. If there are any discrepancies, report the same with the vendor so that it can be rectified soon.
It’s an obligation to correct the discrepancy within 30 days of being reported. Once the mistake is corrected it will reflect in the credit report, improving the credit score.
EMIs are really important to be paid on time. Larger the amount of an EMI more important it is to be paid off in time. This is one of the most important things CIBIL looks into while rating someone.
Timely payment of installments gives a good score. It is important to keep a track of installment dates. And ensure that the bank account has enough money for the payment of the installment.
Credit cards are really good to cash in on future earnings. But it’s good only if a person uses it in a timely manner. Using credit cards for almost everything is not a great idea. It is better to keep your credit utilization ratio up to 30 percent or lesser. This will help the credit score, positively. And keep the monthly balances low.
Credit accounts that are not active are usually closed down. It’s good to close down a bad account. But it’s not a wise decision to close down a good account. A good credit card account that is managed well with timely payment is a blessing. It gives the much-needed durability to the CIBIL score.
- Eliminate the balances
- Report Inaccuracies
- Timely EMI payments
- Check your credit utilization
- Keep the good credit card accounts active
Keep the good account as long as possible if the repayment history is good.
In the end, just keep in mind that credit is good but only when used wisely or it could ruin lives.