Credit Card: Having a low CIBIL score can make you feel like a risky borrower and act as a financial scarlet letter. Let’s dispel a myth first, though: Having a low CIBIL score does not automatically mean you will die. Think of it as a minor financial setback, something you can easily overcome.
Understanding the Causes of a Low Credit Score
A string of errors can lead to a low credit score. These errors could be the consequence of a challenging period during which you failed to make some payments, excessive use of your new credit card, or simply failing to keep an adequate amount in your account. It’s critical to keep in mind that your CIBIL Score is not a permanent record, but rather a dynamic snapshot of your credit history.
The Path Back to Recovery
Debt Repayment as the Initial Step
Paying off your debts is the first step in restoring your credit score. Think about consolidating your credit cards and loans if you’re managing several of them. By consolidating all of your debt into a single loan, this method makes debt management and repayment simpler.
A Crucial Financial Threshold
Don’t let your EMI payments exceed 30% of your take-home pay. This cutoff point makes sure you can afford to keep a reasonable repayment schedule and aren’t overstretching yourself financially, which is essential for repairing your credit.
Credit Limit Discipline
Avoid the urge to use your credit card to the limit. Rather, keep your balances modest and exercise caution when requesting more credit. Recall that maintaining good credit on your current cards can greatly raise your score.
Diversify Your Credit Portfolio
Don’t restrict yourself to personal loans and credit card debt, which are unsecured loans. Having a variety of credit histories, including secured loans, demonstrates to lenders your ability to repay debts of all kinds.
Monitor Your CIBIL Report
Pay close attention to your CIBIL report. Verify any inaccurate information that may be affecting your credit exposure, such as incorrectly reported open accounts. You can track advancements and gain insight into your credit behaviour with regular monitoring.
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