Thursday, 10 August 2017

How Can One Repair Their Credit Score?

If there is one thing you should know about credit scores, it’s that finding a personal loan, home loan, etc. can be really difficult unless yours is a good. Your credit score will play an important role at various points of your life. So, it’s really important that you monitor it well and take the necessary steps to improve it whenever necessary.
The following are some of the best ways to repair your credit score:
1. Removing Settled Accounts
You can’t expect to improve CIBIL score if the credit report mentions an instance of debt settlement.
Debt settlement is usually the last resort for a bank or NBFC that’s not able to receive the full loan amount from a borrower. So, when a person defaults on a loan, the bank gives them an option to pay only a small portion of the actual debt and be done with it. While exercising this option removes all the problems for the time being, it ruins the credit report. So, if you ever decide to take another loan in the future then the mention of debt settlement in your credit report can make it nearly impossible to succeed in your endeavour.
You must get your bank to remove the remark on debt settlement from the credit report if you want to improve CIBIL score. You can simply contact them and explain your situation. If you can convince them that you are ready to repay the pending balance they might agree to your request.
2. Becoming Careful with Payment Deadlines
One of the easiest ways to improve CIBIL score is to start paying credit card bills on time. The same goes for other kinds of debt payments, such as loans, mortgages, etc. There are two benefits of becoming punctual with payments:
·        You don’t have to pay fines or penalties for late payments.
·        Your credit report shows a consistent pattern which not only helps in increasing your CIBIL score but also makes you a good candidate for pre-approved loans.
3. Lowering Credit Utilization
Perhaps the reason why you are unhappy with your free CIBIL score is because you were using your credit cards too much, which led to high credit utilization. So, by limiting that you can repair the credit score easily.
The key to a balanced credit utilization is understanding how it works. Let’s say you have two credit cards with each having a credit limit of Rs. 1 lakh. If you are using one of these on a primary basis and spending on average Rs. 50,000 per month then the credit utilization on that card is 50%, which is quite high. On the other hand, if your credit utilization on the second card is about Rs. 10,000 then the credit utilization on that one is just 10%. In this situation, what you can do is use both cards for a maximum spending of Rs. 30,000 each. This way, the credit utilization is only 30% on each card, which is perfectly within limits and will help improve your CIBIL score.
4. Avoiding Minimum Payments
A large number of people end up with a poor CIBIL score because they are unaware about the bad effects of minimum credit card payments.
Banks want more and more people to apply for credit cards. To convince them they advertise the option of “minimum payments” which are basically partial payments that you can make and still continue enjoying the benefits of your credit cards.
While it’s true that you are not fined for not paying credit card bills in full if you are making minimum payments, the remaining balance is still collected as debt. This debt has to be paid off eventually and is actually bad for your credit score. So, if you want to repair credit score, you must start avoiding minimum payments.

Improving CIBIL score doesn’t have to be hard. If you are careful with your actions and check your free CIBIL score every once in a while then you can make remarkable progress in just a few months. However, if you have your reservations for the same, then you can also consult a professional.

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