How to improve cibil score after credit card or loan settlement?

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How to improve cibil score after credit card or loan settlement?

Praveen Sharma

Tuesday, May 17, 2022

test In today’s credit-driven economy, a good credit score has become essential to one’s financial success as a good CIBIL score throws light on the creditworthiness of a borrower and on other hand helps the financial institution to check cibil score of individual and make an informed decision before granting any loan.

CIBIL score is an image of the creditworthiness of a borrower. All financial institutions and NBFCs usually look at the credit score before approving any loan to an individual as it symbolizes to them the likelihood of paying back a loan by the individual.

A credit score is viewed as solid just when it goes from 750 to 900. In the event that the individual has a score of 750 or more, banks and other NBFCs believe a person to be credit healthy as a high score is characteristic of good credit health. Whereas, if the score is less than 750 for an individual, banks get an indication of risk in giving approval to the loan or issuing a credit card. In India, CREDIT bureaus have different ranges for their credit scores and produce credit reports for individuals. So you should know how to improve a CIBIL score after you settle it.

How does a loan settlement or credit card affect your cibil score?

There are various ways to improve CIBIL score which are:

Pay down the outstanding balances: Any loan or credit card balance that remains unpaid has a significant impact on your cibil score. The more you delay, the more interest will accrue, and you'll have to pay a higher amount to pay off the debts. Simultaneously, your cibil score would continuously start dropping as you delay in payment. Paying it off will help you improve your credit score and loan eligibility.

Make regular payments: It is a very essential factor to make payments regular on time and also make full payments. This factor has a necessary impact on CIBIL score. Irrespective of how big or small payments are on loans or credit cards, never default it. Then, only it will indicate a positive impression on the lender.

A balance between the credit: The combination of both secured and unsecured loans should be balanced so that it will show favorably on the credit score

Credit utilization ratio: The individual must maintain a credit card utilization ratio between 30-40% as it makes a positive impact to apply easily for loans or credit cards in the future.

Check on credit report: The individual should keep a check on his credit report every six months to rectify the errors to avoid further confusion as there are some mistakes that are unnecessarily dropping the CIBIL score.

Change the status from 'Settled' to 'Closed': If you've reached an agreement with your credit card issuer, you should pay your payment in full and change your status from 'Settled' to 'Closed.' Talk to your credit card company and convert your account to a 'Closed' account, based on your income and affordability. Your credit score will improve significantly as a result of this.

Do not use more than half of your credit limit: The amount of money you have available on your credit accounts is another aspect that influences your credit score. For instance, if your credit card has a limit of Rs. 50,000,do not spend or exceed more than Rs. 25,000 per month .A bad impact will be seen on your grades. To increase your cibil score, you should use half of your required time.

If you've been turned down for credit, don't keep trying: Do not attempt to obtain a loan from a lender who has already refused the application. Such information is included into CIBIL's database. Credit-hungry behavior is also indicated by the high frequency with which loan applications are filled and submitted. Also, if they apply to another bank relatively quickly.

This way CIBIL assumes a fundamental part in India's financial system. Individual credit scores won't just assist moneylenders with getting to advance qualification yet additionally assist them with seeing how reliable an individual is. So keeping a solid CIBIL score is critical.