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CIBIL scores play a big role in determining whether or not an individual is eligible for availing credit from a financial institution. The score ranges from 300 to 900, with 300 being the lowest and 900 the highest. A score that is below 700 does not reflect well on the individual, and if the number is below 500, the score-holder needs to take immediate measures to raise the figures as he or she would otherwise end up facing many bumps along the financial journey. A low or bad score can get the applicant termed as a ‘credit risk holder’ by financial institutions, which restricts their possibility of getting access to loans or credit cards.
The closer the CIBIL score is to 300, the more caution financial institutions will take while deciding whether or not to offer loans or credit cards. Lenders tend to have less faith in such individuals when it comes to the question of repayments being made in a timely fashion. To the lender, it shows that the borrower has excessive debt or has missed repayments in the past and therefore, is financially unstable. Should the institution decide to extend credit to such an individual, chances are that the interest rates charged will be very high. Additionally, they may require that a guarantor be listed for reducing the risk that the lender is taking in extending credit. Under any circumstance, if the borrower with the weak score is unable to repay back the money, the guarantor will be asked to cover the cost of the borrowed amount.
Now, all is not lost simply because an individual has a bad CIBIL score. There are various measures the person can take to raise his or her credit rating. Here is a look at some of the steps to rectify a bad CIBIL score:
An individual can undertake various measures to keep from getting stuck with a bad CIBIL score. Here are the things to avoid so as not to end up with a bad CIBIL score:
What is a bad CIBIL score?
A score that is below 700 does not reflect well on the individual, and if the number is below 500, banks and other financial institutions can term it as poor or bad. Individuals with such scores need to take immediate measures to raise the number as they would otherwise end up facing many hurdles along the financial journey. Financial institutions tend to view such applicants as ‘credit risk holders’, which restricts their possibility of getting access to loans or credit cards.
What causes my CIBIL score to drop?
Financial discipline is essential if one wants to maintain a good CIBIL score. Without it, the three-digit number can quickly drop, reducing the individual’s chances of getting approval for any loan or credit card. Some of the reasons why an individual’s CIBIL score can go down are:
How do I fix a bad CIBIL score?
There are a number of measures an individual can take to fix a bad CIBIL score. They are:
What do the scores below 750 imply?
|300 to 550||CIBIL scores within this range are considered bad. Chances of such applicants being approved a new loan or credit card are very unlikely as lenders term them as high risk.|
|550 to 650||CIBIL scores within this range falls between the labels of poor to fairly decent. It shows that such applicants have not performed too badly on repayments. There is still a high possibility that their loan or credit card application will be turned down.|
|650 to 750||CIBIL scores falling within this range are considered good and there is a much higher possibility that such applications will be accepted. However, since the element of risk is still there, the applicants may not get as many loan benefits as expected.|