5 Legal Ways to Fix and Improve Your CIBIL Score Quickly After a Loan Rejection
Getting a loan application turned down may prove frustrating, especially if you desperately require cash for buying property, a car, education, or even starting a business. One of the leading causes of a loan application failure could be the applicant’s past financial record or CIBIL score.
The positive thing about it all is that this low score may not remain the same forever. The individual can take various steps, which will ensure his credibility and chances of securing approval in future applications.
Understand Why Your CIBIL Score Dropped
To work towards improving your CIBIL score, it is essential to determine the reason for your poor CIBIL score.
Late payment of EMIs, non-payment of credit card statements, excessive usage of credit limit, loan default, multiple loan applications, or inaccuracies in your credit report can be some of the possible causes for your low CIBIL score.
Getting hold of your recent credit report will help you pinpoint the actual reasons for your low CIBIL score.
Pay EMIs and Credit Card Bills on Time
Credit history forms one of the major aspects influencing the credit score.
Even a small delay in EMI or credit card payments could hurt your credit report. In case you have made delayed payments previously, then try to ensure timely payment in future for all your due amounts.
You could set up auto-payment or reminders to prevent making future late payments. It will take some time but will definitely work in improving your credit report.
Reduce Your Credit Utilization Ratio
Reducing your credit utilization ratio is yet another highly efficient method for improving your CIBIL score.
It means the amount of credit utilized in relation to your total available credit limit. According to financial advisors, one should keep the credit utilization ratio below 30% of your total credit limit.
Suppose you have a total credit card limit of ₹1 lakh, then your outstanding balance should always be less than ₹30,000.
Check Your Credit Report for Errors
Credit reports sometimes contain mistakes. It is possible that wrong information about the loans, duplicate accounts, or overdue payments that have actually been made may bring down your score.
You should look carefully through your credit report and file a complaint if there are any errors found. If the error will be confirmed, it will be corrected by the credit bureau or the lender, and your score will probably rise.
Moreover, checking your credit report regularly allows you to see if any fraudulent activity is taking place.
Avoid Multiple Loan Applications
Multiple applications for a loan or credit card in quick succession will adversely affect your credit score.
Whenever you apply for a loan, the lending institution makes a hard pull on your credit report. Hard pulls in abundance might signal financial troubles and decrease the possibility of getting approved.
Instead of constantly applying and facing rejections, you need to make changes to your finances first and then make another attempt.
Maintain a Healthy Credit Mix and Older Accounts
A healthy combination of secured debts like mortgages and car loans and unsecured debts such as credit cards will have a positive impact on your credit profile if you use them wisely.
On the other hand, try not to close your oldest credit card account unless there is a dire need for that. An old credit account plays an important role in determining the age of your credit history, which is also taken into account while computing your CIBIL score.
How Long Does It Take to Improve a CIBIL Score?
Most people want immediate changes, but getting back to a good credit rating needs time.
According to the reason for having a bad score, it can take up to one year for you to realize positive results. It just takes patience. By paying the debts on time, by reducing debt and borrowing, you will achieve that.
What Score Is Generally Considered Good?
Although the rules for loans vary among banks, having a CIBIL score of 750 or more is usually good enough for a majority of loan applicants.
A higher score means increased chances of being approved along with the possibility of getting a better rate of interest. Nevertheless, there are various other parameters that the lender looks at apart from the CIBIL score.
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Conclusion
Although it may be disheartening to be refused a loan because of a poor credit score, it does not mean that this is the end of your borrowing life. Through developing responsible financial behaviors, rectifying mistakes, decreasing debts, and ensuring prompt payments, you can slowly work towards building a good CIBIL score.
Good credit requires time but every financially responsible action brings you closer to the day when it will be easy for you to get loans. It takes time to earn a good CIBIL score.
