It’s a common misconception among consumers that someone with a low CIBIL Score may not get any access to credit or loans, let alone a chance to rebuild their score. And that seems to be reason enough to never let your score drop.
However, the truth is a low credit score can be caused by a number of unavoidable circumstances too — you may have hit a rough patch and couldn’t make timely payments, you allowed yourself to get carried away with your brand-new credit card, or you simply forgot to keep your account funded and missed the due date. While your credit profile may be affected by these factors, your credit score is beyond this. Your CIBIL Score is a reflection of past credit behavior and payments; it’s a history of your credit, and the good news is that history can be created all the time.
So even if you have hit rock-bottom, there are ways to rebuild your credit history and CIBIL Score, starting today.
- Start by paying off all outstanding amounts: As soon as you can overcome your personal crisis, make it a priority to pay off all outstanding dues. If you have numerous credit cards and personal loan accounts, consolidate these loans and take a single loan to pay it all off. Not only do you now have one single loan to worry about, but you can also avoid multiple payment due dates.
- Reduce your existing EMIs to 30% of your monthly salary: Your EMI to income ratio should not be more than 30% of your net salary. Any amount over and above this reduces your financial capability to responsibly repay your loans. Maintain this cap on your EMIs and build your credit profile.
- Keep your balances low and apply for additional credit cautiously: You may be tempted to maximize the use on your credit card when in a financial fix. Act with caution. Keep a low balance and apply for more credit only if you really require it. Rather than have more cards in your wallet, consider using the old credit cards you have. Good credit behavior and timely repayments on your old credit cards can help you build your score.
- Boost your credit profile by mixing it up: Don’t just stick to unsecured loans, i.e. personal loans and credit cards. A mixed bag of credit helps build a better profile, as lenders can see that you are keen on repaying your loans, whether it has collateral (secured loans) or not.
- Monitor your CIBIL Score and Report regularly: Go through your CIBIL Report and check for any inaccuracies, such as incorrectly stated open accounts that may increase your credit exposure. Also, keep monitoring your score and report to know how well you are doing, your score analysis, credit history and trends.
Remember, a high CIBIL Score will help you get access to loans and credit whenever you need it the most. All you need is time and conscientious efforts to set this right. Start rebuilding your score today and work towards your financial goals and dreams.