We do come across situations where a credit line is required to meet our financial requirements. In such situations, especially in case of an exigency, the CIBIL report plays acts as a passport to reach out to credit. The importance that this three digit numeric expression of our credibility plays in our financial life cannot be ignored at any time. Hence it becomes highly important for one and all to avoid situations that would lead to messing up the score.
While an individual may have all the intentions to safeguard the credit score, a few precautions will help him avoiding landing into a difficult situation that leads to debt traps, eventually making him credit unhealthy.
Tackle the credit card outstanding
If you have a large outstanding balance on your credit card, you need to deal with it in first place. This is the most expensive credit and large outstanding more often than not, lead to late payments and defaults. This will result in pulling down your credit score. This should be the first step in direction of improving and managing your credit score.
In case the high outstanding has been on account of some exigency and one is unable to deal with it, following options can be explored. First, curb your expenses and pay off the credit card; second, take a loan that you can pay over a longer duration, which will also result in saving a fortune that you would end up paying in interest on credit card; third, if you have a family member or a friend who is a trusted confidant, you may even consider taking a short term loan from him to get over this obstacle.
A word of caution, in the event of not having been able to arrange for funds, please ensure that you are paying at least the minimum amount due each month on or before the due date without fail.
Repay loan EMIs on time
Repayment of your obligations on time is critically important. Please ensure that your account is funded before the due date to avoid any bounced EMI. Timely re-payment of all EMIs and outstanding balances is you ticket to a good CIBIL score. In the event of default, you must proactively approach the lender and pay off the due amount immediately along with the due late payment charges, penal interest that may get levied.
Keep a hawk eye on your credit utilization
Keep a check on your credit utilization. Credit utilization is the percentage of credit limit that you have utilized on your credit cards. It is prudent to keep your total credit utilization below the level of 30%. In case of a higher utilization, you must try to reduce this over a period of time.
Increase your total credit limit
This may be a backhanded way of doing things, but if your credit utilization is high, check with your bank or credit card issuer whether it is possible to enhance your total credit limit. Assuming that your credit card issuer agrees to do so, do not make the mistake of thinking of it as a green signal to spend more, as that will bring up your credit utilization even further, rather than reducing it.
Check for inaccuracies in your credit report
A poor CIBIL score can come as quite a shocker if you are fairly sure that you have maintained good credit behavior by making all loan and credit card outstanding payments on time. In such a case scan through your CIBIL report and check for inaccuracies. Sometimes there may be some data amiss when lenders are making a data entry that they send to CIBIL. For example, you may find that a loan account may still be displayed as open in your CIBIL report whereas you may have repaid the loan amount in full more than six months back. In such a case you will be required to raise a dispute with CIBIL.
In order to ensure that there are no such discrepancies, it is best to pull out your CIBIL report at regular intervals just to be sure that all the information that pertains to you is recorded correctly.
As it is evident from what we have told you so far, it takes a fair bit of effort to keep your CIBIL score at or above the level 750 (out of 900). If your CIBIL score has plunged because of unpaid loans or credit card balances you may have to put in that extra bit of effort to repay the loans and bring your CIBIL score back to 750 and above. Of course this may mean cutting some corners and putting in that extra bit of effort to enhance your income, but once the results of these efforts start impacting your CIBIL score, your efforts will seem worth it! What’s more you will have the peace of mind knowing that with a good CIBIL score, you will be able to access credit when you are really in need of it. Written by Arun Ramamurthy, Director, Credit Sudhaar & author of Unlock the Power of Your Credit Score : India’s first book on Credit Scores
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