An individual may come across unforeseen financial circumstances. To cater to their urgent requirements, they take financial help from the banks by availing credit lending facilities like loans. Though, these should be opted after planning out an entire repayment plan. However, things don't need to work out as planned, and they may start missing the due dates, making late payments, eventually defaulting on the loan. While applying for a loan, your credit score is the primary factor that makes you creditworthy and financially reliable in the eyes of the lender. The credit score is an essential parameter based on which lenders evaluate the repayment ability of the borrower. Hence, it is necessary never to come across as a CIBIL defaulter.
The primary role of credit bureaus is to gather and preserve information of an individual’s payment records and financial history related to credit cards and loans. When you default on a mortgage or fail to fulfill any repayment, your repayment behavior is reported by the lenders to the credit bureaus. When the non-repayment of the loans starts getting reflected in your credit history, the credit score reduces drastically and ultimately creates a negative impact.
Factors to Consider to Maintain CIBIL Score
To avoid such a situation, you need to know how to improve your credit score after being a loan defaulter. Given below are the points you must keep in mind to help you with the same.
Examine your credit report: By assessing your credit report regularly, you will be able to keep track of how your financial profile gets affected by your credit-related activities. Sometimes, it may even happen that your credit report contains inaccuracies. Therefore, by doing a careful examination of your credit history, you will be able to ensure that the details in your credit report are correct. If you find an error, you can contact the credit bureaus to fix the mistakes. Getting your credit score rectified is an important step that can help you get along with your financial situations.
Clear off your dues: Delay in repayment of the loans is another reason behind poor credit score. Hence, lenders mostly reject the loans for CIBIL defaulters considering their financial unreliability. A lower credit score indicates an inability of the lender to pay back the borrowed amount. Clearing off outstanding dues on time will improve your credit report. You can talk with your lender if you have financial constraints to find a solution. Thus, clearing off dues will prove your creditworthiness.
Pay bills on time: When a borrower takes a loan, they are required to pay Equated Monthly Installments or as called EMIs to the lender. Even a single delay and partial payment can affect your credit score since many transactions of the payment of bills gets recorded and reported to the credit bureau. Even if you skip a single loan installment, your credit score gets impacted negatively. Thus, paying bills on time is essential to revamp your financial sanity.
Multiple loan queries: Your credit score gets negatively impacted by makinnumerousle loainquirieses as eacinquiryry you make reflects in your credit history. Multiple loan queries creates an impression that a borrower is desperate to seek funds and is financially wasted. Whenever you apply for credit, banks ask CIBIL for your credit report and each loan enquiry that you make gets recorded in your credit report. This may even lead to the rejection of loan applications in future. Make a loan enquiry after working on improving your credit score for the next three-four months.
Seek financial advice: When you are in a lawsuit, you can seek the advice of a financial counsellor to help you create a budget. By creating a budget, you will be able to create control over your money. They will counsel you, analyse the situation and give possible solutions that can follow. They will also guide you on how to approach the lender when you are undergoing a financial crisis.
Always ensure that your CIBIL credit score is above 750 to increase your possibilities of being accepted for credit. Bad credit score leads to the rejection of future loan applications since lenders view you as a risky and irresponsible borrower.