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News India Live, Digital Desk: Low credit score: In today’s era, when we need a loan for every major purchase or financial need, then Cibil Score Plays a very important role. It has a number of three digits (between 300 and 900) which reflects your financial reliability. A good CIBIL score (usually 750 or more) helps you to get loans at easily and inexpensive rates, while the bad CIBIL score can close the door for you.
Many times we inadvertently make some such mistakes, which spoils our CIBIL score and we do not even know. If your CIBIL score is bad too, do not panic! The good thing is that it can be improved. Let’s know the 3 main mistakes that spoil your CIBIL score, and easy ways to improve them:
CIBIL score 3 biggest mistakes and ways to correct them:
1. Missed or Delayed Payments: The biggest mistake
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Mistake: This is the biggest and common cause of CIBIL score deterioration. Not paying time for credit card bills, personal loan, home loan or car loan EMI on time has a direct negative effect on your CIBIL report. Even a delay of one or two days can affect your score.
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Why does it happen?: People sometimes forget, sometimes do not have enough balance in the account, or sometimes the payment is missed due to financial problems.
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How to improve?:
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Pay immediately: First, pay the outstanding amount and penalty immediately.
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Set auto-debit: Set auto-debit facility for all your EMI and bills so that the payment is never left out.
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make a budget: Make the right budget of your income and expenses so that you can always keep money ready for your EMI.
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Talk to the bank: If you are in a serious financial crisis, contact the bank and request EMI restructuring or moratorium (EMI preventing for some time).
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2. High Credit Card and not paying the entire amount (High Credit Utilization): When the dependence on credit increases
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Mistake: Your credit utilization ratio shows how much part of your total credit limit you have used. If you use too much part of your credit limit (eg more than 30%) and do not pay the entire amount every month, it negatively impacts your CIBIL score. Credit companies see it as ‘extreme dependence on credit’.
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Why does it happen?: Using a credit card no thought and paying minimum.
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How to improve?:
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Reduce Credit Utilization: Do not use your credit limit more than 30%. If you have used more, try to repay the entire amount as soon as possible.
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Increase credit limit: If you can increase your credit limit (and you are not using it), then your utilization ratio will automatically decrease.
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Use of more than one card carefully: If you have more than one credit card, make sure that you are paying all the bills on time and there is not much outstanding on any card.
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3. Many loans applying or checking credit reports repeatedly (Frequent Loan Applications & Hard Inquiries): When you look ‘credit hungry’
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Mistake: When you apply for a loan or credit card, the bank makes ‘hard inquiry’ of your credit report. Many hard inquiry in a very short time can reduce your CIBIL score, as it indicates banks that you are ‘credit hungry’ or you may have financial troubles. Checking your own credit report (soft inquiry) does not affect your score.
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Why does it happen?: Immediate needs of loan or credit card and lack of information.
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How to improve?:
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Apply only when needed: Only then apply for a loan or credit card when you really need.
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Do research first: Before applying, do research of offers and your qualifications of various banks, so that the application is less likely to be rejected.
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Check your CIBIL report regularly: Check your CIBIL report once a year for free (on the CIBIL website), so that you can fix it immediately if there is any mistake or wrong entry.
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Remember: The CIBIL score takes time to improve, but it is not impossible. Be patient, maintain financial discipline and avoid repeating your old mistakes. Once your CIBIL score improves, many doors of the financial world will open to you!
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