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Many times some problems arise due to which we are unable to repay the loan amount. Its biggest impact is on taking any kind of loan in the future. Banks shy away from giving loans if the credit score is bad. Even if the bank gives a loan, the interest on it is very high. If your credit score has become bad due to any reason, then you can improve it.
What are credit scores and credit reports?
It is a three-digit number, which ranges between 300 and 900. The higher the number, the better the credit score is considered and the greater the chances of getting a loan. The credit score is also called the CIBIL score. At the same time, the report of records related to any kind of loan transaction and credit card payment from the bank is called the credit report. Apart from your credit score, the credit report contains information about your name, date of birth, address, phone number, job, loan or credit card application etc. A CIBIL score of 750 or more is considered good. Whereas a score between 300 and 550 is considered bad.
What are the benefits of a good credit score?
If a person's credit score is more than 750, it is considered good. The higher it is, the greater the chances of getting a loan from the bank.
With a good score, the process of getting a loan approved is quite fast and hassle-free.
If your credit score is very good then the bank can give you loan at a low interest rate.
How to improve your credit score
Do not take more than one loan
If your credit score has been affected due to non-payment of a loan installment, then do not take another loan to repay this loan. If its installment is also stopped, then the credit score will deteriorate further. Yes, if you want to take a second loan to expand your business, then take it honestly and repay all the loan installments on time.
Repay the loan installment on time
If your credit score has deteriorated due to not paying your loan installments or credit card bills on time, then start paying them on time. Ask the bank to improve your credit score. Also assure the bank that now you will pay the installment or bill on time.
Do not increase your credit card limit
If your credit score is getting affected due to not paying the credit card bill on time, then avoid increasing its limit. This will only increase your expenses and the bill amount may also increase. In such a situation, there may be a problem in paying it. If the bill has increased, then convert it into EMI. This does not affect the credit score.
Talk to the bank
If you do not have money to pay the EMI or credit card bill, then talk to the bank without delay. The bank can give you some extra time to pay the amount. In this way, you can avoid becoming a defaulter and your credit score will also not be affected.
Don’t use the full limit of your credit card
Avoid using the full limit of your credit card. It is better not to use more than 50 percent of the credit card limit. If you face difficulty in paying the bill due to such use, it is better to stop using the credit card and also get the credit card closed. This can help you avoid a bad credit score.