05-Sep-2018 written by : FSI-Team
Your credit score may look like an innocuous three digit number, but it packs quite a punch! This score is based on the assessment of your credit behaviour or how diligent you are in handling your loans and credit cards. As a result, it is mandatory for all lenders to refer to this score as a part of your credit assessment process when you apply for a fresh loan or credit score. If your score is poor because of your past credit behaviour, it can stand in the way of you getting access to cheap and timely credit.
To get timely credit, or even so much as getting your application through to a traditional lender, your credit score has to be at least 750 (out of 900). But what if due to mishaps in the past, you score has already nosedived, and are you need some funds urgently. Well, first things first don't panic. There is a solution in personal loan for low CIBIL score. While traditional lenders may not give you a hearing, you can always approach a non-traditional lender such as a P2P lender for your credit needs.
P2P platforms can be described as virtual loan market places
Taking such a loan, will not only help you address your cash problem at hand, it will also help you rebuild your credit score. However, do bear in mind that rebuilding your score is not an overnight process and what you need is infinite patience to enhance credit score one step at a time. Here is how you can go about it:
First up, carry out a self-assessment of how you have landed up in this situation in the first place. More often than not, credit card is responsible for a poor credit score. If credit card debt is your problem as well, take stock of the total outstanding debt. Avoiding looking at your credit card statements and paying only the minimum amount each month will not do you any good. In fact it adds on to your revolving credit. The first thing you should do thus is resolve the outstanding credit card debt.
Consider liquidating some other asset to tackle this problem at hand. If you are not in a position to do so, you may consider a personal loan for a low CIBIL score for debt consolidation purposes. While it may seem like a contradiction to take on more debt, when you are already struggling with the credit card debt at hand, a personal loan at this stage can serve more than one purpose. Firstly, you can clear your entire outstanding debt at one go. This will bring about an immense amount of mental peace. Secondly, a personal loan is way cheaper than credit card debt (14-20% as compared to 36-40% on a credit card). Thus you save on interest cost and repay your credit card all at the same time with a single loan.
Now that the burden of credit card is off your shoulders, it is time for you to think of ways to enhance credit score. The only way to do it at this stage is by making regular repayments on your loan. This time, you cannot afford to go wrong with your loan. Thus, make loan repayment a priority. Try chalking out a budget which takes into consideration loan repayment and other standing expenses upfront. This may mean that you will have to compromise elsewhere and give up a few luxuries. But it is going to feel rewarding at the end, when you will have repaid your loan in full.
However, do keep in mind that the road rebuilding credit is a long and arduous one. Your credit history did not plummet in a day and thus rectification cannot be fast tracked either. Patience is the key to improve your low credit score. After having cleared all your outstanding debt and establishing a regular repayment record on your personal loan for at least six months to a year, you can hope to get your credit score back to the satisfactory level of 750 and above (out of 900).
If you are currently battling bad credit woes, do not worry as it is not the end of the road. Keep a calm head over shoulders and follow the steps as enunciated above.