How To Repair Bad CIBIL Score?

A bad or low CIBIL score can create hurdles in accessing financial products such as personal loans, home loans, credit cards, etc.

Money is a scarce commodity, which is why it is essential to manage it in a responsible manner. A CIBIL score effectively measures an individual’s ability to manage his or her finances. However, there can be unavoidable situations that can lead to a low CIBIL score. If you are facing a similar situation, let us take a look at how to repair a bad CIBIL score.

What is CIBIL score?

Before we delve into how to repair a bad CIBIL score, let us first understand what exactly is CIBIL and its implications. CIBIL is short for Credit Information Bureau (India) Limited. It is one of the four companies that have been licensed for undertaking credit information tasks. Credit score is also provided by other companies such as Experian, Equifax and Highmark. However, CIBIL is the most widely used in India. Part of American multinational group, TransUnion, CIBIL tracks the finances of millions of individuals and businesses. CIBIL score is in the range of 300 to 900, with the higher the better.

What happens if you have a bad CIBIL score?

You can face multiple issues if you have a low or bad CIBIL score. For example, you may find it difficult to secure various loans such as personal loans, two-wheeler loans, car loans, home loans, etc. You can also face problems when applying for new credit cards. The same is also true for insurance products. Due to low CIBIL score, you may be asked to pay higher interest rates on your credit facilities. Moreover, banks and other financial institutions may not agree to extend credit for longer durations.

Nowadays, even many employers have started checking the CIBIL score of job applicants. CIBIL essentially measures an individual’s responsible nature, something that is relevant for employers. Even some landlords have started checking CIBIL score before renting their property. That means you may face problems in finding the right accommodation when you have a low CIBIL score.

How to improve or repair a bad CIBIL score?

As evident from the above points, it is essential to have a good CIBIL score. An ideal CIBIL score is usually considered between 750 to 900. The closer you are to 900, the easier it will be for you to access financial products and services. Here are some steps you need to take to improve your CIBIL score. Remember that it will take some time and not happen overnight.

Pay your EMIs regularly – Every time you pay your EMIs on time, your credit score improves slightly. Choose auto payments to avoid missing out on any EMI payments.

Avoid high credit utilization – Your credit utilization ratio reveals how you are managing your finances. If you fully utilize your credit limit, it may lead to a lower CIBIL score. If you use a small percentage of your credit limit, it will have a favorable impact on your CIBIL score.

Choose smaller EMI amounts – High EMIs can be difficult to repay. That is why you should choose smaller EMIs and longer duration loans. This will reduce the risk of EMI defaults.

Avoid multiple loans – Taking multiple loans can increase your financial burden. For example, if you have 5 products to buy, choose them at a gap of one or 2 years. Start with the ones that are of priority. You can also consider second-hand products that may be available at much affordable rates.

Fix mistakes in CIBIL report – Sometimes, there may be some delay or error in updating your financial transactions. This can lead to a low credit score. To fix this, you need to download your CIBIL report and check if there are any mistakes. By correcting such errors, you can improve your CIBIL score.