A poor CIBIL score plays a great role in an individual’s financial planning since it limits his/her abilities to access dream loans, credit cards, and in some cases the ability to sign a rental agreement. 

CIBIL score varies between 300 and 900, which are considered negative if they fall below 650. A bad credit score is a result of the following; missed payments, high credit utilization, and unpaid credit balances. 

It is important to know what a negative score means because it always comes with costly consequences, such as high interest rates or rejection of loans.

But it is not the end of the world yet. That is why the CIBIL score can be enhanced and creditworthiness reconstructed in practical ways. Just stick with paying your bills on time, paying down your existing credit, and keeping your credit use low over time, the rating will improve. 

At the same time, the latter also means that reviewing credit reports and verifying that there are no errors will help focus on the areas requiring action, as well as avoiding new credit checks to help maintain one’s credit rating. 

Yes, it is possible to turn the worst by improving your CIBIL score so that you have a better future in terms of financing. In this article, the five most useful approaches concerning the problem of credit recovery will be described.

Causes Of Negative CIBIL Score

There are certain reasons which lead to a negative CIBIL score. The main reason for this is loans and credit card payments which people often miss due to one reason or the other, thus harming their payment history. 

The amount of credit utilized is also a declining factor which means that using the greater percent of your total credit limit would also mean a lower credit score. Further, if multiple hard inquiries are made due to loan or credit applications it reflects that a person is financially unstable. 

Late payments and/or charge-offs on the loans, as well as a lack of credit score, also hurt a score. These are problems that, if recognized early enough, their impacts can be managed; therefore, it is important to check your credit report frequently.

5 Ways to Improve Your CIBIL Score

Here are five effective ways to achieve a better CIBIL score:

1. Pay Off Outstanding Debts: It’s recommended that all existing obligations, starting with unpaid balances, be erased. Not only does it save you money, but it also has a very positive impact on your credit utilization ratio, which is one of the fundamentals that helps determine your CIBIL score.
2. Make Timely Payments: It is also important that any and all bills, for example, your credit card bills, balances on loans, and any bill that is due should be paid on time. Where payments are made, the ability to always clear the balance within the respective periods shows promptness in paying the bill, and can greatly help increase CIBIL score after some time.
3. Maintain Low Credit Utilization: It is particularly undesirable to have more than 30% of your credit limit used by retaining the ratio to 20% if possible. This means avoiding using more than 30% of your total credit limit, as this score will determine your creditworthiness. Using credit frequently may help lenders deduce that you are an incredibly reliant consumer, which is bad for your score.
4. Review Your Credit Report for Errors: It is advisable to check your CIBIL report periodically, looking out for inconsistencies. In case you come across any such mistakes you are supposed to dispute them with the credit bureau as soon as possible to help you get the right score.
5. Limit New Credit Applications: Do not apply for multiple credit lines in one go, as each application requested will lead to a hard inquiry, thus reducing your CIBIL score in the immediately following months. Avoid applying for new credit, mainly because holding existing credit is more important than applying for new credit frequently.

Check Your CIBIL Score

Knowing your CIBIL score is important for making any financial decision in your life. It is possible to get a CIBIL score from the official CIBIL website or from some other sites that are approved to work on this subject.

First, to join the site, give your basic information such as your name, date of birth, and identification info among others. Once registered you can be able to stand ‘my credit report and score’, although most companies allow one free check of the report and score in any one year.

Informing about credit status and having an idea about the measures that need to be taken, helps to check CIBIL score from time to time. One needs to review for any flaws that may pull down his/her score, considering accuracy is a foundation area of the test. So, every time one thinks out a plan for accessing credit in the future, it is imperative to act as a proactive participant in the management of one’s credit.

CIBIL Score & Common Myths

Here are some common myths about CIBIL scores, presented pointwise:

 

1. Myth: Getting your CIBIL score checked deducts from it.

 

Fact: When you check your own CIBIL score this adds up to a soft inquiry and does not reduce your score.

 

2. Myth: Income determines the CIBIL score, and a high income ensures that a person has a good CIBIL score.

 

Fact: Your CIBIL score depends on your credit history and not your earnings potential.

 

3. Myth: Paying off what you owe helps raise your credit score.

 

Fact: Cardholders should not close credit accounts, as doing so creates an effect that reduces the length of credit history and, therefore, your score.

 

4. Myth: There is no difference between any types of credit, and repaying credit backs affects the CIBIL score.

 

Fact: Credit utilization and the type of credit are also ranked differently; missed payments on credit loans are highly penalized.

 

5. Myth: According to the second research question, factors such as CIBIL scores are the only ones taken into account by lenders.

Fact: Lenders also take into consideration income, and employment history, existing liabilities, besides the CIBIL score.

Conclusion

Here, one comes to the conclusion that the negative CIBIL score works as a hindrance towards accessing financial opportunities, though not completely a barrier. This has pointed to the five approaches of; settling debts, timely payments, low credit utilization, erroneous checking on the credit report, and less applying for credit, hence one can rebuild credit score. It may take time and some dedication, however this can be useful because those with higher CIBIL scores will be able to get loans and other forms of credit at easier terms than before. It not only improves financial position but also gives an individual better control for future planning over their credit health.