A credit score is your financial report card which indicates how good you are in repaying debt, paying outstanding, and so on. Bankers, financiers, or anyone who is going to trust you with repaying money is going to look at your credit score before granting you a loan.
In India, 79% of applicants individuals with a credit score higher than 750 get their loans approved. It is a tough task for others to get their loans approved.
A poor credit score has other disadvantages too, like:
- Makes it difficult to get fresh loans
- Interest rates will be higher than normal
- The repayment period and EMIs will be higher than usual
So, in case your credit score is busted and needs some repairing, here is what you can do:
#1. Maintain credit card balances
“Pay your balances and maintain low balances”
suggests, Pamela Banks, Senior Policy Counsel, Consumers Union.
If you have inconsistent credit card balances throughout the month try to maintain an optimum level of 30% or so. Anything higher is risky.
#2. Repay dues on time
Repaying your credit card balances and loan repayments on the due date or before that earns the highest credit score. Maintain a spreadsheet or a reminder system that alerts you when a card is up for repayment. Never miss a due date and your credit score will be fit as perfect.
#3. Cancel unused cards
Unused credit cards still attract annual fees. If you fail to pay the annual fees interest will be compounded on them which can accumulate to be a fair large sum of money within a span of 6 months.
Hence, cancel a credit card if you are not using it or have no plans of using it in the future, contact the card issuer and get it canceled. Make sure you have the cancellation recorded in written form.
#4. Appeal to CIBIL
Although CIBIL follows a systematic and fail-proof method for calculating a credit score, at times the credit score gets wrongly updated in records.
In such instances, it is always possible to appeal to the CIBIl with proof that your credit score needs to be reworked on. By law, the agency has to consider and process the appeal within 30 days from the date of filing. The actual credit score will be restored automatically once the appeal is processed.
That explains how you can fix your credit score if it seems to be on the lower side.
Have any doubts about your credit score and how it will affect your new loan application?
Let us know in the comments. Our experts will help you out.