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How to improve CIBIL score after credit card bill settlement?

A high CIBIL score is the dream of every individual as it is proof of the individual’s credibility and plays a crucial role in credit card and loan approval. CIBIL score and its significance

CIBIL is basically a 3-digit number that ranges from 300-900. The closer you are to the 900 mark, the more dependable your credit profile is. It plays a very crucial role when an individual seeks loan assistance or credit card approval from any bank. It is considered as the first and foremost screening criteria to determine how reliable a person is. It is like your rank and likability towards the bank.

CIBIL score is calculated by doing a thorough analysis of various factors like payment history, a number of the loan availed, types of loans, outstanding debt, and credit history of an individual. Depending upon their own internal CIBIL score standards, the bank decided whether the person is a responsible credit card holder or not.

Improving your CIBIL score after credit card bill settlement is a lengthy process

Many of you must have the notion that improving your CIBIL score post credit card bill settlement would be easy and quick. But the reality is far-flung. It takes time and patience. In banking terms, the settlement is the situation when a car holder is unable to pay its dues balances against his/her credit cards. To make things simple, the bank calls for an overdue settlement. In this overdue settlement, the bank will ask the cardholder to pay a particular amount in lieu of total dues and will discontinue giving credit card services to him/her. Though the cardholder is now free from the dues, the settlement has a negative impact on it CIBIL score.

How to improve your CIBIL score post credit card bill settlement?

As we all know that a high CIBIL score is what makes you likable and eligible to get a loan and credit card, one should have a high CIBIL score to impress the bankers. If, due to some reason, you have low CIBIL score, then don’t lose heart. We have come up with some experts’ tips that can really help you improve it considerably.

  • Change your “Settled” status to “Closed” – One of the easiest ways to improve your CIBIL score is to change “settled” status to “Closed’ one with your credit card company. To do this, you have to pay all your dues once and for all. A ‘Settled’ status gives a negative impact as it indicates that the individual hasn’t cleared his/her dues completely. If your dues are very high and it’s next to impossible for you to pay them all in one go, then we would suggest you have a discussion with your bank or credit card company. Try to negotiate over a certain amount which is within your paying capacity and equally desirable by your bank or credit card company. When you will have a ’closed’ status in your CIR then it will definitely have a positive impact on others.
  • Keep the right available balance in your credit card- Your credit card available balance also plays an important role in deciding your CIBIL score. The key to have a high CIBIL score is to use only 30% of your maximum card limit in your credit card account. Individuals those who exhaust their maximum card limit will have a negative impact on your CIBIL score.
  • Try to pay regularly- Your payment record is another important factor to decide the nature of your CIBIL score. The easiest way to improve your CIBIL score is to make full payment of all your dues and balances on time since the start. Those who do it have a boosting CIBIL score in comparison of that cardholder who delays his payments.
  • Get a credit card against any fixed deposit account- If you have a low CIBIL score that needs improvement by all means, then another viable way to achieve this is to apply for a credit card against any fixed deposit account. You need not have a huge amount saved in your fixed amount. You can start with as low as Rs. 25,000 as well. The bank will issue a credit card with a maximum limit of 90% of the amount in the fixed deposit. Use this card regularly and spend only 30-40% card limit.
  • Clear all your outstanding balances- If you have any outstanding balances against any of your loan or credit card, then it is going to affect your CIBIL score. The more you delay to pay off your outstanding, the worst your CIBIL score will become. Postponing your outstanding will do nothing except deteriorating your CIBIL score, Don’t have a craving for the credit- It is often found that people apply for credit, again and again; this show that you are hungry for credit and gives a negative impact on your credit score as well. Buying multiple credit cards is also another major reason for the low CIBIL score. When you have multiple credit cards, it becomes very difficult for you to do timely payment that ultimately puts a financial burden over you. Henceforth, you have a poor CIBIL score.
  • Use your credit card intelligently- It is a very common practice amongst the credit card holders that they spend a lot with their credit card without thinking about its later impact. Most the cardholders don’t even know the right way to use the credit card that leads to a negative CIBIL score. The best way to use the credit card is to consume only 30-40% of total credit card limit every one month. With this spending limit, you are going to upkeep an affordable payout balance and you can easily avoid any pending payments.
  • Go for the right type of loan- The loan which you take also plays an important role to decide your CIBIL score. There are mainly two types of loans: secured loans and unsecured loans. Secured loans are those which are utilized to build or acquire a stable asset. Home loan is a type of secured loan. Whereas, unsecured loans are those which are availed to acquire depreciating assets. Car loan, vacation loan, and credit card debts are some of the examples of unsecured loans. Secured loans have a positive impact over one’s CIBIL score while un-secured loan affects it in a negative sense. A portfolio with 80% of secured loans and 20% of unsecured loans is considered as an ideal portfolio which has a positive impact on CIBIL score.
  • Opt for good credit habits – Good credit habits pays you off in long run. If you seek high CIBIL score then you have to be an ardent follower of good credit practices for years and only then your creditor will gain trust over you. Not using various credit cards during your rebuilding period, avoid over-spending, timely payments are some of the good credit habits that one should always practice improving their CIBIL score post-settlement.
  • Don’t hold back yourself- You have just faced a credit card settlement. It is disheartening. But don’t stop yourself to use your credit card. This will again increase your agony. If you need to build your CIBIL score, then you have to use your credit by all means. Holding back your credit is not at all recommended during your rebuilding period. When you are in your rebuilding period, we would suggest you use your credit card within limits. Open a new credit card account with low balance and pay off its dues every month.
  • Don’t forget to take NOC from your card provider- If you are closing any card, then it is recommended to get a NOC from your card provider. Not taking a NOC defiantly has some adverse effect on your CIBIL score. When you have a NOC, it clearly indicates that the cardholder has a clean chit from the bank and is a responsible cardholder. Always make sure that you acquire a NOC from your card provider within 45 days of card closure.

The advantages of improved and high CIBIL score

Individuals those who have high CIBIL score have many advantages over their low CIBIL scorers. Apart from establishing yourself as a reliable loan seeker, a high CIBIL score gives you various advantages like:

  • Easy and quick mortgages approval- With high CIBIL score, you will have easy and quick mortgages approval to the individual. There is no hidden fact that high CIBIL score indicates the credibility of any individual and the banks don’t think for a second to approve the mortgage request raised from a high CIBIL scorer. Credit cards with low-interest rates- If you have a high CIBIL score, then your credit card company is going to offer you a low-interest rate.
  • Instant high-limit approval- Banks do not grant high-credit card limits to anyone. They look out for various factors before approving the same. However, it would be an easy and hassle-free process to all those who have a high CIBIL score.
  • Low home and car loan interest- Individuals with high CIBIL score are going to get low interest on home and car loans without any doubt.
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