14-Oct-2017 written by : FSI-Team
Often people may discover about their dismal credit scores when their loan application is rejected or they are unable to get a credit card. A credit score above 700 is thought to be good and anything below that might raise problems for the applicant who is seeking credit. How serious the problem is will depend on how bad the score is, is it just a little low or is it dismal? Reasons for a dismal score could be different but whatever they might be it is almost certain that you will need to put in some serious effort and have patience if you want to better it.
A credit score below 700 is not considered ideal but that does not mean that scores at all level below the threshold are considered dismal. So if someone has a score around 650, it will not be considered dismal and the applicant is still likely to get his loan or credit application accepted. So what can be considered to be a dismal score? Though there is no hard and fast rule that may define this and it may vary from situation to situation but a score below 550 could be termed as dismal.
This level of score indicates frequent defaults by the borrower, maybe a loan that has been settled or has been classified as a NPA (dues have not been paid for more than 90 days) Sub (account has been a non-performing asset for over a year), Doubtful (Account has been in the SUB status for more than one year) or Loss (account which is uncollectable and is confirmed as a loss). Being on the loan defaulter list of any lender frequently is a fast way to getting a dismal credit score.
As we said above credit can be dismal for a variety of reasons working individually or in a combination together. Thus the first and most logical thing to do would be to identify the reason for the score being so low. If there is an old loan or there are credit card dues which are reflected as unpaid then it would be a good idea to pay them immediately; this will have some positive impact on the score. Keeping the credit card usage below 35% is a good way to try and improve the score. Utilization of more than 35% of the sanctioned credit limit indicates risky and credit hungry behavior and is not good for the credit score, so keep your monthly billing in check.
Payment history is the most important factor in the CIBIL score calculation; so if you are in the habit of making late payments or missing them completely it’s time to kick that habit immediately. While nothing can be done about the missed payments and delays that happened in the past you could definitely try and improve things for the future.
When you are trying to work on improving your credit score then one thing you definitely need to stay away from is applying for fresh credit. Though it is unlikely that the application for fresh credit is accepted but generating an enquiry in your credit score when you apply for credit anywhere, further reduces the score. You could work on options like debt consolidation, paying the most expensive loan first or requesting the lender to lower the EMI and increase the tenure if you find it difficult to pay the monthly loan installment.
Credit score reflects your credit history and how you have treated your debt in the past. It is not something that takes into account only the last month's payments or misses. Thus the score cannot be built or spoilt in a hurry. Just like a single delay in payment will not cause your score to become dismal, being regular in payments or keeping a check on your credit card bill for just one month will not improve the score immediately. So have patience and follow basic tenets of sensible credit behavior.
If you feel that you are unable to identify the cause, or are not disciplined enough to follow a strict credit regime or find it difficult to improve the score on your own then you can take professional help.