11-Oct-2017 written by : FSI-Team
In an ideal world, the people who take loans would repay them in the right manner and within time. However, in the world we actually live in, people take personal loans, car loans, etc. and default, or use credit cards only to end up with a high accumulated debt which puts them under a tremendous financial strain. To limit such scenarios, the concept of credit score was introduced.
If you are having a hard time getting a loan due to a low CIBIL score, then you should take this problem seriously. Fortunately, it can be fixed easily if you decide to become more responsible towards your spending behaviour and practice good credit habits such as:
A bank will happily give a loan to an individual who has an excellent credit repayment record and little to no current debt. Thus, if you have a high credit debt, then you must clear that as soon as possible if you want to improve CIBIL score and get the loan you want.
One thing you must know as you work towards credit card debt clearance is the concept of "minimum payments". You may already know the benefit of making minimum payments, which is to pay only 2-3% of your credit card bills, but do you know the downside?
A minimum payment of credit card bill allows you to dodge the penalties that you may otherwise have to pay if you don't pay the bill at all. However, the remaining balance is carried over to the next month and added to the next month's statement. You can again make a minimum payment and the same steps take place. The problem- your debt keeps on growing. Plus, the debt attracts a high interest. So, apart from the growing debt, you also have additional interest amount that you have to pay at some point or another in the near future.
So, the bottom-line is that you must never let your card debt increase. The best way to do this is to clear every month's bill in full.
When was the last time you checked your credit report? If your answer is "6 months", "1 year", or even longer than that, then maybe that's the reason behind your low CIBIL score.
So many people wrongly face difficulties due to a poor credit score even when they have been highly responsible towards their credit score. The reason- credit report mistakes.
Believe it or not, wrong credit report information is one of the most common reasons behind a poor score. it could be anything- typo in your name, address, financials, etc. or even incorrect repayment details.
So, if you want to improve CIBIL score then it's important that you check your credit report at least once every few months. If you notice any mistake or discrepancy, be sure to contact your bank to get them corrected.
To attain a high credit score, you should keep the credit utilization ratio low. This is the ratio of the credit you use with your credit card to the total credit card limit. So, if you spend about Rs. 50,000 per month on average and the card limit is Rs. 1 lakh, then the credit utilization ratio would be 50% which is quite high.
There are two ways you can lower your credit utilization ratio:
The key to helping your credit score is paying your bills and EMIs on time. In fact, every single one of these matters. So, prepare a budget and control your expenses accordingly. This way you will always save enough money to pay your bills on the right date and prevent delays that are bad for your credit health.
Improving credit score can be tough. However, the good habits above can surely help you. If you still have your doubts and need faster results, then you can also consult a credit score professional.