If you are worried about a low Cibil score, here’s what you can do to improve it.
Your Cibil score may just be a three digit number, but there is no undermining its importance when it comes to the assessment of how creditworthy you are. With a poor Cibil score, you will not be able to access credit when you really need it and your dream of being a homeowner, car owner or even getting a personal loan when you are in urgent need of one, may be squashed.
If your credit history is not up to the mark for some of your actions in the past, and your Cibil score has dwindled as a result, you have to be proactive in rectifying it, so that it does not impact your financial health further. So here are some steps that will put you on the right path to improve your Cibil score.
Keep an open mind
First up admit that there has been a mistake with the way you have handled your money, and that is what has brought your Cibil score down in the first place. Be prepared to understand and accept your mistakes and have the right attitude to go about with corrective action.
Find out where you stand
Now that you have admitted the problem, it’s time to access your Cibil score and your report. Remember, it is not handed out free of cost and you must apply for it on the Cibil website by filling out an online application, submitting your KYC documents and paying a fee of Rs 470. You will have to go through an online authentication process. If you complete this successfully your Cibil score and report will be mailed to you and you can download it immediately. (For more information on the purchase of your Cibil score visit https://www.cibil.com/faq/purchase-post-purchase-help#t158n384)
Find out where you went wrong
Your Cibil report is not like the report card you received at your school and will not list out your mistakes. You will therefore have to learn how to read your Cibil report and find out why your Cibil score is low. Your credit report contains all your account information including all your bank accounts, loans and credit cards. Assuming that the rest of the information is correct, pertaining to your identity and the status of your accounts, look out for your DPD or days past due in every credit card or loan that you have availed. DPD indicates how many days a payment is due on the account in that particular month. Anything more than “000”is viewed as negative and brings down your Cibil score. Also check for ‘Written-off’ or ‘Settled’ flags. These flags are a clear indication of default in the past and could be the primary reason for a low score.
In case of an error
Your bank gives information about your loan account or credit card to Cibil and some times there may be discrepancies in this reporting process. These errors may be responsible for bringing down your Cibil score. Sometimes you may find errors such as an inaccurate account balance, an overdue amount when a loan repayment has been made, or a loan account that has been closed from your end but does not reflect on your Cibil report.
In such cases, you need to raise a dispute on the Cibil website by using their dispute request form. Your dispute is then passed through the dispute resolution cell of Cibil and taken up with the credit institution pertaining to that particular loan account. Your dispute takes approximately 30 days to get resolved. There may also be serious errors such as ownership of a loan, where you may find details of a loan on your Cibil report that you may not have availed of at all. This may be a case of identity theft. In such a case write to Cibil immediately and Cibil will look into the matter on a priority basis.
Make a plan and stick to it
Once you have identified what the problem is, make a plan on how to improve your score assuming that your Cibil report is error free. If you need to pay off unpaid debts,outstanding amounts or even settled amounts, think about the best way that you can repay them. Without repaying these amounts, your score might not go in the right direction only with good behaviour on your new accounts. If your score improves without doing much with the old accounts, don’t feel too happy about it! Lenders will notice the negative flags on your report while evaluating you for new credit and might deny you new loans.
Talk to the lenders you have defaulted with in the past and try to work out a strategy in which you can repay those amounts. We do not say its is easy! You will have to be disciplined about your other expenses and cut corners somewhere, but be determined and patient and stick to your plan and over time you will have a clean Cibil report and will result in an improved Cibil score. A good Cibil score is an obvious indication of good financial health and will prove to be beneficial in the long run.
The post rectification plan
Once your Cibil score has been rectified, make a resolution to keep balances on your credit card low, and make timely repayments on loans and credit card bills. Also maintain a healthy mix of secured and unsecured credit and apply for new loans or credit cards after much thought and consideration. These prudent financial practices will keep your Cibil score intact and help you access credit easily when you really need it.
Your Cibil score is not something that is etched in stone, and corrective measures can help you bring it back to a satisfactory level of 750 and above (over 900). It is imperative that you maintain a good Cibil score always. It is not just a reflection of your credit worthiness that lenders will access when you apply for some new credit, but may also be accessed by a potential employer when you are seeking a job. So make sure your Cibil score is in order and if it is not, take corrective action immediately.
The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.