24-Feb-2018 written by : FSI-Team
No one would want to shell out money for anything that possibly could be done by self. While there are a few things that one would definitely be able to accomplish on his own, the others may be difficult to achieve in case an expert is not engaged. Let us review if it is possible to repair credit scores without the help of a professional.
Let us first understand as to what is credit score and the factors that impact it.
This is a numerical expression that rates an individual on the probabilities of him defaulting on a new trade line within a specific period. In India, the Reserve Bank of India has set the range from 300 to 900. Higher the score, lower are the chances for default. A score of 750 is perceived to be a good score across the lending institutions.
Getting a loan approved these days is like winning a war, if you are not certain about your incomes, cibil scores.
Broadly there are five factors that impact the score. And these are:
Payment history: This factor has the largest weightage in the calculation that accounts for 35%. How has one faired against the obligations is logical to be impacting the most?
Amount owed: Again this factor is a big contributor to score calculation. Amounting to 30%, this element factors the amount outstanding across all trade lines against the actual sanctioned amounts.
Length of credit history: Having a 15% impact in the algorithm, the longer the history the better it is. As it would give the bureaus a much better view on someone's chance to assess the borrower, the vintage of exposure to loans help.
Types of credit: The variety of credits that one would have managed impacts to the extent of 10%
New credit: The new loans or cards that would have been taken by the individual would also have a 10% impact on the profile
The question now is that can one who is looking to improve CIBIL score can do it without seeking an advice from an expert who would need to be paid for the services. The answer is both yes and no.
Yes, because the broad factors that are given above can definitely be worked upon by an individual. And no, because it may not be easy to understand the nuances and complexities that entail around the factors impacting one's credit profile.
If you are the one who believes in DIY (do it yourself which is the buzz word these days) then you can begin by approaching any bureau in India to obtain a free credit report. You can do by just following a simple online process and the bureau report will be available to you.
However, understanding the report may not be possible for all. It is like those medical reports where one is given the range and can make out if the count is within or outside the prescribed range but may not be able to comprehend the impact that it would have on his physical health. While the parameters given above seem to be quite simple but given the fact that each individual has a different financial background and the exposure of loan would also vary from one person to the other, it may not be easy to draw a plan on how to go about repairing the depleted figures reflecting on the report. Also, one would be required to administer the plan and take corrective actions to achieve the objective. This would only be possible with the help of an expert.
So while one can try to do so on his own, it may take him a long time by trying all kinds of hits and trials as against seeking an advice from an expert. A delay in improvement would also result into a delay in having access to funding from banks. This also has a chance of restricting access to credit when one may need it most.
In conclusion, one has both the options available to start working on the improvement of impaired credit score.