Having a strong CIBIL score is crucial for everyone since it determines whether or not a loan will be approved. Your CIBIL score is determined by your previous loan payment history. A CIBIL score of 900 or higher indicates good creditworthiness, whereas a score of less than 750 indicates that you are a risky customer for banks or money lenders. As a result, if your CIBIL score is low, it is critical that you take quick steps to raise it.
Let’s have a look at why your CIBIL score is so low
There are a variety of factors that can contribute to a poor CIBIL score. A borrower’s CIBIL score can be affected by inaccuracies made by the borrower, as well as errors made by the bank or lender. Let’s look at the various explanations for a poor CIBIL score.
Credit card bills that haven’t been paid
Some people who use credit cards fail to pay off their entire balance before the due date. They pay the minimum amount due, and the remaining balance is carried over to the next due date. Their CIBIL score may suffer as a result of the pending credit card debt in their account.
High Credit Usage
If a person utilizes his or her credit card to the extent that it exceeds 30% of the limit, it might have a negative impact on his or her credit score. Excessive credit card use indicates a significant reliance on borrowed funds.
Missing or delaying loan payment dates
Failure to make EMI payments on time can result in a negative record on your credit report. The repayment habit is a significant aspect that influences the CIBIL score calculation.
Too many loan or credit card applications
Every time a person applies for a loan or credit card, the bank initiates a credit application inquiry. Too many inquiries may represent you as a credit seeker, lowering your CIBIL score.
What steps can you take to raise your CIBIL score?
Let’s see how we can improve our credit score, because we all know how important it is. If you are planning to apply for a loan and are aware that your credit score is low, you can quickly boost your credit score by following the procedures outlined below.
Examine your credit report for any mistakes
Your credit report should be checked on a regular basis because it will represent your credit history as well as the behavior of your outstanding and cleared debts. If you discover an inaccuracy in the records or an anomaly in the information obtained, you can contact CIBIL via the website to get it corrected. The credit score will immediately alter once the credit record is updated with the correct information.
If you’ve been turned down for a loan, don’t keep trying
When it comes to life’s obstacles, persistence is a fantastic quality to have, but not when it comes to loan applications. Examine why your loan was denied and then work to remedy the error before submitting a new application. Applying for many loans on the spur of the moment will have a negative influence on your credit record and Credit score, as you will appear to be a frantic credit seeker. Lenders like to lend to those who have a good credit history and can demonstrate their ability to repay their debts. Any hint of desperation from an applicant can send a red flag to a lender, causing them to reject the loan application.
Restructure the loans that aren’t working for you
One of the most common causes of a low CIBIL score is missed loan payments or late EMI payments. If the current loan schedule is making it difficult for you to repay, you should contact the lender/bank and request that the loan be rescheduled/restructured to make repayment more reasonable. This technique will help you get back on track with your late loan payments while also increasing your CIBIL score.
While a low credit score can have a negative impact on your finances, the good news is that it isn’t the end of the world. Following the methods above, a person’s CIBIL score can be improved to a point where they can readily obtain credit again like loans or best credit cards. Once you’ve improved your credit score, make sure you keep it up to date in order to retain your creditworthiness.