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All about Credit Score Repair?

Credit score is essential for leading a financially secure life. If you have a low credit score, you may be prohibited or face obstacles from taking personal or home loan at the hour of need. The road to repair credit score is time-consuming but once done, you unlock all the possibilities of having a hassle-free life. Go through the article to understand how your credit score goes down, the ways to improve the score and what you can do with a good credit score.

What is Credit Repair?

Credit score is a three-digit numeric number found in the Credit Information Report and it plays an integral role in initiating the loan application process. The lower the score, the more trouble you may face. In case, you have bad credit history, it is necessary to follow certain measures to fix the issue. Credit repair is a way to improve score without paying one penny further. If you can follow the steps carefully and maintain financial discipline, you can take a car loan or house loan in no time. As you are set to buy a new house and start a new family, you have applied for a home loan fulfilling every criterion. However, your loan was rejected due to credit score being too low. The easiest way to get the loan is to wait for some time and repair your credit score.

Steps to Improve a Poor Credit Score in India

The first way to repair credit score is to obtain the credit information report and credit bureaus charge around Rs. 550 a month for the report. After getting the report, go through the following steps and improve it.

  • Check CIBIL Score Report at Regular Intervals: After availing the credit score report, check how many open accounts there are against your name. In this section, you may face two problems such as the mention of accounts not opened by you, and the account has been closed by the lender. If CIBIL has made a dispute, you can contact the lender for finding the remedy quickly. In addition to the context, the report contains the account name, account type, account number and ownership information. The account details are also mentioned including credit limit, current balance, sanctioned amount, repayment tenure, amount overdue, EMI amount, cash limit and payment frequency.
  • Monitor the Payment History: Check the past due section of each account and anything besides, ‘XXX’ and ‘000’ are considered in a negative context. You should pay EMIs and bills on time, as when you miss payments, it brings the score down. Also, take a look at the ‘settled’ or ‘written off’ account because it is considered in a negative light. You can raise your concern with CIBIL if the account is tagged in a wrong way.
  • Take Actions Promptly : You can start to resolve the issue by contacting CIBIL and the authority will respond to your query within 30 days. However, if the respective financial institution confirms the transactional information to be true, CIBIL cannot make any changes. In this case, it is better to be in touch with the bank for expediting the procedure directly.
  • Issues with Lender regarding Annual Charges: When you are getting a loan or credit card, you should always go through the terms and conditions carefully. If there is any confusion about the yearly fees such as issuance fees, service fees, maintenance charges, interest rates, penalties, pre-closure charges, transfer charges and processing charges, you should ask forthwith.
  • Get Rid of Balances: Start eradicating every trace of credit balance by paying off the bills. This is the basic step of how to repair credit score in 6 months and the paying off bills includes loan dues. Ask the help of bank officials and negotiate to shut down the loan account by clearing the overdue bills. CIBIL score is wildly affected by the heavy balance amounts on your credit card. Limit the number of credit cards and it will become painless to keep track of paid and unpaid bills.
  • Avoid Closing Old Credit Cards: When the burden of debts becomes too severe, users consider closing the credit account. However, if you are finding the answer to ‘how to improve credit score’, this may not be the ultimate solution. This step will only take your score down. Even if an old credit card is not actively used, it should not be closed. On the contrary, use the old one for managing the timely payments because it has more impact on the CIBIL report. Holding a good credit card repayment history is the easiest way to repair the CIBIL rating. A decent CIBIL score is an additional cushion to financial profile and timely payments can only save you. It enhances the longevity of the credit score and paves the path of receiving fast loan sanctions.
  • EMI Payment: If you are about to buy a four-wheeler, residential apartment or property, EMI payment is considered to be the easiest one. It is better to use a credit card instead of an EMI account and it will improve the record of securing higher CIBIL score.
  • Focus on Utilisation Ratio: Too much credit usages can degrade the good credit score status. One should only stick to the important transaction and maintain the credit utilisation ratio around 30%-40% for availing low interest on the loan. Also, the low monthly balance can improve the CIBIL score fast. Distributing the expenditure amount between two or three credit cards is a wise move.
  • Causes behind Rebuilding Credit Score : Once you repair the credit score, you can manage to get three (recommended) loans at a time and manage their payments easily. But what factors are the cause of such a low score?
  • Outstanding Remainder: Outstanding balance influences 30% of your credit score and you should clear it off. The small amount of debt should be paid off as soon as possible. It is also affected by the frequent use of credit card. If you use way too many credit cards, the amount of outstanding balance may be a burden to you. Before you repair credit score, you should only utilise 20%-30% of the entire credit which is present to you.
  • Prepayments: In past, you might have had prepaid loans. At that time, the thought of fixing credit score and bettering it must have also occurred. However, the early payments never repair credit score. The only thing you should keep in mind is to make timely payments for keeping up a steady history.
  • Non-receipt of Statement and Missed Payments: The card user is required to pay the outstanding balance regardless of the receipt. Non-receipt of the statement may be the cause behind Non-payment and it is not considered a right reason for missing payments. When the outstanding balance is due, the service charges and late payment charges are calculated. If the problem is not resolved soon, the credit history is hampered. The bank can provide an effective solution.
  • Numerous Loan or Credit Enquiries: When you apply for a new credit, 10% of your credit score is influenced. The need of repairing your credit score arises when you apply for too many loans or credit cards. The continuous enquiries go against the credit report and your credit score goes awfully down. In addition to the context, having too many loans becomes difficult to manage. The unsecured loans have a high-interest rate and it is a burden to pay every month. Gain better credit score and maintain the percentage of loans at a low level.
  • Credit Payment History: The credit payment history comprises 35% of credit score. If there is no consistency in paying utility bills, the score goes down. From credit card bills to mortgage payment, all the bills must be paid before the due date for avoiding the remark of late payment.
  • Prolonged Debt: The long period of debt is one of the reasons why you need to repair a credit score. As the duration of debt holds 15% of credit score, the long debts leave a negative impact. Moreover, you should not close any credit account which you have opened long before.
  • Errors in Credit Report: The minor issues (wrong address and contact address or misspelt name) never keep you awake at night for finding the ways to repair credits score. On the contrary, the major errors such as incorrect PAN, non-reporting of present loan status and mistake in payment status can decrease your score rapidly. There may be various reasons for missing earlier payments and genuine financial constraint, like loss of a job puts a person in a crucial place. At this time, clear the debts when the financial situation is stable and follow the advice of the bank personnel. Therefore, you can secure a clean credit history for leading a better life in future.

FAQs On Credit Repair

Can I get fast approval on my loan for high credit score?

A good credit score is the key to having loan sanctioned as early as possible. After rebuilding the credit score, if your credit score has reached 800, you are creditworthy. Once the lender is satisfied with the score, the chances of rejection are minimal.

How is Credit Card application related to credit score?

The banks always take a look at the CIBIL score before issuing a credit card. The payment history shows how quickly you have repaid the dues. For the first-time borrowers (not having any credit card in the past), it becomes a little difficult to issue a card. The problem arises due to the lack of credit score.