A CIBIL score below 500 puts you at the risk of being viewed negatively by lenders and hence, you can lose the opportunity to get a loan or credit. What is a CIBIL Score? CIBIL Score is a type of credit score, a three digit number indicating your credit worthiness. Various credit information companies operate in India which have developed their unique credit score algorithm. The most popular credit information company in India has been The Credit Information Bureau (India) Limited, which is now known as TransUnion CIBIL Limited after TransUnion, an American company partnered with CIBIL. CIBIL is one of the few RBI (Reserve Bank of India)approved credit information companies in India.
Lenders and banks check your CIBIL score in order to gauge your financial credibility and to mitigate potential risks caused by payment defaults on part of the borrower. CIBIL Score ranges between 300 and 900, with 900 being the best credit score and 300 the worst credit score. A CIBIL score below 500 is considered poor and it can lead to rejection of your loan application. So let us have a look at how you can improve your CIBIL score if it is below 500.
Pay your Bills on Time- It is understandable that the proliferation of e-commerce has led to the ease of purchasing from anywhere at any time. But,falling into the trap of impulsive spending can reflect poorly on your credit report and credit score. If you are indulging in expenditure beyond your means, there is a high probability that you will not be able to pay your bills on time. You need to keep a check on spending your credit in order to improve your CIBIL score. You need to ensure that injudicious spending does not lead to default or delay in paying your bills on time.
In spite of the fact that the information about your utility bills and phone bills is not present in your credit report, you must pay these bills on time. This is because a credit provider can report your debt to a credit reporting agency and tell them to record your default in your credit report.
Evaluate your Credit Report Regularly- Going through your credit report thoroughly on a timely basis will help you identify the areas you need to resolve in order to improve your credit score.These areas which are to be resolved can include defaults or delayed payments which could bring down your credit score.Firstly, you can have a look at the loans or credit cards in which your defaults and delays have taken place and rectify the same. Secondly, you can also report incorrect information(if any) regarding your name,date of birth,email ID and PAN card in your credit report immediately to CIBIL.
Checking your Credit Report regularly will help you to identify discrepancies in the report about your credit information and report your disputes to CIBIL. It is mandatory for financial institutions to act on disputes within a month.Reporting disputes will help you in enhancing your CIBIL score.
Pay off Credit Card Balances- You need to pay off your credit card balances for improving your credit score.If you have unpaid credit card dues, it will reflect poorly on your CIBIL Report. You need to spend only the amount that you can repay within the billing date. Also, it is advisable to limit the number of credit cards you have,to make it easier for you to keep track of your payments.Bajaj Finserv RBL Bank SuperCard offers many benefits such as easy and attractive EMI options and hence, can be a good option in terms of choosing which credit card to go for. Bajaj Finserv RBL Bank SuperCard can be availed online from Finserv MARKETS. It is financially wise to apply for a credit card from Finserv MARKETS as they provide several benefits ranging from easy EMIs to interest-free cash withdrawal.
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Utilize Credit Prudently- Keep your credit utilization ratio low for improving your credit score. Ideally, your credit utilization ratio should be less than 30% to 40%. Your credit utilization ratio is the ratio of credit utilized by the borrower to the credit limit set for the borrower. Even if you get a high credit limit, keep a check on your credit utilization. Never spend the entire credit as this will leave a negative mark on the lenders. Do not use your credit card for all your expenses.
Review Joint Application Regularly- You need to check your loan repayment record for the loans in which you have a co-applicant. Even if you are not at fault, default or delay in payment on the part of your co-applicant lead to poor credit score on your credit report. It is recommended that you reduce joint loan applications.
Maintain Credit History- Do not close old debt accounts as a history of good debts increase your financial credibility. The longer the credit history you have, the better, as long as you have a good payment history.
Reserve Bank of India (RBI) has made it compulsory for credit card companies, banks and other financial institutions to check the CIBIL Score of every loan applicant or credit card applicant. Hence, the CIBIL score with its range from 300 to 900, is an important determinant and influencer on your ability to access loans and credit. A CIBIL score below 500 significantly reduces your chances of getting your loan approved and hence, you must strive to improve your score if it is below 500. Paying your bills on time, cutting down your expenditure and monitoring your credit report regularly are some of the ways through which you can improve your credit score.