Maintaining a healthy credit score is vital for financial stability. There are numerous factors responsible for a healthy credit score such as length of credit history and credit utilisation ratio.
Additionally, if you are struggling to make payments, consider reaching out to your creditors to discuss alternative payment arrangements or hardship programs. Your bank may be willing to cooperate with you to avoid negative reporting to credit bureaus.
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You should keep a close eye on your credit report and score by regularly monitoring them.
This enables you to quickly identify any issues or discrepancies and take appropriate actions to address them.
Key steps to follow if your CIBIL score is low:
Review your credit report: Obtain a copy of your credit report from CIBIL and review it thoroughly. Look for any errors, inaccuracies, or fraudulent activities that may be affecting your score negatively.
Pay bills on time: Making late payments can have a significant impact on your credit score. Make sure to pay all your bills, including credit card bills, loan EMIs, and utility bills on time to avoid any negative impact on your score.
Reduce credit utilisation: Aim to keep your credit utilisation ratio below 30 percent. This means using only a small portion of your available credit limit. High credit utilisation can indicate financial strain and negatively affect your score.
Avoid multiple credit applications: Every time you apply for credit, it triggers a hard inquiry on your credit report, which can temporarily lower your score. Minimise credit inquiries by only applying for credit when necessary.
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Diversify credit types: Having a mix of credit types, such as credit cards, loans, and mortgages, can positively impact your credit score. However, only take on credit that you can manage responsibly.
Seek professional help: If your credit situation seems overwhelming, consider seeking help from a financial advisor or credit counsellor.
They can provide personalised guidance and strategies to improve your credit score. It is vital to remember that rebuilding a credit score takes time and consistent effort. By following these steps and maintaining responsible financial habits, you can slowly improve your credit score over a period of time.
Frequently Asked Questions:
What is the key disadvantage of a low credit score?
Among several disadvantages, one of the key disadvantages is that you are likely to be offered higher interest rates even when a loan is approved.
How often should you check your credit score?
Most experts recommend to check the credit score at least once a year.
Does a high CIBIL score offer better rental opportunities?
Landlords may also check your credit score when evaluating rental applications. A high CIBIL score can, therefore, raise your chances of securing rental housing, particularly in competitive rental markets.
What is the significance of payment history in maintaining good credit score?
Making credit card payments on time is one of the key factors which influences the credit score. So, when a credit card holder can manage a number of payments in a responsible way, it is seen positively on his/her credit history.
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Published: 09 May 2024, 06:00 PM IST