A bad credit score can generate number of worries for you in future. A credit score is not only indicative of the fact that you have been disciplined in honoring your credit card bills and repaying EMIs for your loans, but it also makes your life easier by enhancing your possibilities of getting loans in future. Don’t be disheartened if you have a bad credit score. Follow the following ways to gradually improve your score and relieve yourself from tensions:
1) Make your payments on time
Default in payment or late payment hampers your CIBIL report. When your credit statement reminds you of paying minimum balance and you happily pay it, then you save yourself from paying late payment fees, but it negatively impacts your credit score. Month after month, repetition of same scenario keeps on reducing your loan eligibility. Sometimes, we make a payment through cheque just one day before the last payment without realizing that there is a transit time for the cheque to be presented and cleared. For that reason, it will be a good habit if you can make payments through cheque 3-4 days before the last day. Best way to pay EMIs on time is to give standing instructions to your bank to debit your account or else feed a reminder.
2) Say no to loan settlement
Loan settlement for a lesser amount than what exactly you have to pay leaves your status marked as ‘Settled’ with CIBIL and your name will added to the list of defaulters which is not at all a good sign and will severely impact your credit score. So, say no to loan settlement and pay exactly what is due on you.
3) Avoid being a guarantor
If a person for whom you have given guarantee fails to meet his debt obligation and elopes, then along with his credit score, your score will also be slashed down. Therefore, it is recommended not to become a guarantor for anyone until and unless you are sure about the person or else there is no other choice. In addition, always keep your original and photocopied documents at a safe place so that nobody can misuse them.
4) Try to maximize the duration of your credit history
A person with 4 years of credit history with all payments towards credit cards/ EMIs on time will carry a better credit score than a person with credit history of only 6 months. Therefore, if you are planning to get a loan in future and want to enhance your credit score, then get a credit card, use it and make all payments against it on time.
5) Try to have less number of credit cards
Gone are the days when possessing too many credit cards was considered as a status symbol. CIBIL has a track of all your credit cards. Having many cards suggest that you have too much necessity of credit and will be considered as a negative sign by bankers while thinking of lending you. Therefore, it is better to restrict your cards to 2-3 and surrender the rest. You can also request the bank to increase your credit limit on each card to compensate for the cards that you have surrendered.
6) Avoid using full credit limit on your card
Even though you are timely meeting your debt obligations, you can still suffer from low credit score. Reason for this lies in utilization percentage of your credit card. It suggests that you can’t afford without credit and are dependent on it. Therefore, it is in your interest to spend up to 30 – 50% maximum of your credit limit.
7) Avoid large dependence on unsecured debt
An unsecured debt/ credit arises when you use your credit card or opt for personal loan. Whereas, vehicle loan, home loan, education loan are secured loans. It is noteworthy to understand that credit in itself should never be an all time choice. However, if unsecured debt covers a major portion of your total debt, then it puts a negative impression and lowers your CIBIL score. A right mix of secured and unsecured credit is a better idea to improve your score.