CIBIL score: Does your understanding of loans and credit cards cover what they refer to as CIBIL Score? This three-digit number is important for your creditworthiness, as banks or financial institutions use such a score to determine your reliability as well. But what if you fail to pay the EMIs on the Loan, or delay credit card payment?
Your CIBIL Score suffers as it makes it less likely that you will qualify for future loans. An interesting question will now arise: Can damaged CIBIL scores be fixed, and if so, how long?
Why Does Your CIBIL Score Drop?
Your credit score suffers when you:
- Miss loan EMIs
- Delay payment of credit card dues
- Default on any existing debts
Such lapses are reported to CIBIL by Banks, and the same is updated on your credit report. Due to this, the lenders may deny your loan application or charge a higher interest rate for which you would be paying more, thus adding more troubles to your financial life.
It Takes Years to Repair a CIBIL Score:
Even clearing the dues after some time does not result in an instant bounce back of the CIBIL Score. Even specialists aver that at least 18-24 months before a significant turnaround is observed.
These Are the Critical Stages in Rebuilding Your CIBIL Score:
- Pay EMIs and Credit Card Bills on time- consistency is the key.
- Clear Full Credit Card Dues- Don’t pay just the minimum amount.
- Obtain NOC (No Dues Certificate)-This must be obtained from your bank after repaying a loan.
- Verify Closed Accounts: You have closed a credit card, and motivate banks to update those records.
- Avoid New Debt Until Old Ones are Settled- Don’t take multiple loans; it worsens your score.
- These gradually act to improve your scores, thereby becoming creditors’ trust-rehabilitating instruments.
Banks and NBFCs will check what your credit says before lending you any amount. The lower the score, the more difficult it gets for you to borrow, be it a home loan, car loan, or even a personal loan.