If your credit score is bad and the bank is not giving you a credit card or loan, then these tips are very useful for you

Anil (fictitious name) is employed in a private company. A few years ago, he took a bike loan, but unfortunately, he missed one installment, which negatively affected his credit score. Due to this poor credit score, Anil is now facing difficulties obtaining a home loan. While some private banks are willing to offer him a loan, they are demanding higher interest rates. This situation has left Anil worried and uncertain about what steps to take next.

If you find yourself in a situation like Anil’s, it is crucial to understand how to improve your CIBIL score. The following tips can help repair your credit score and enhance your chances of securing a home loan at a reasonable interest rate. Generally, it takes around 6 to 12 months to improve a credit score, but with the right approach, you can expedite this process.

Steps to Improve CIBIL Score

1. Clear Outstanding Dues
   • Start by paying off any pending dues related to your previous loans or credit cards.
   • Once the payments are made, request the bank or the CIBIL bureau via email to update your payment status in their records.
2. Obtain a Secured Credit Card
   • If banks are reluctant to offer a regular credit card due to a poor credit score, consider getting a secured credit card.
   • A secured credit card is issued against a fixed deposit (FD). For instance:
     • An FD of ₹50,000 can get you a credit card with a limit of up to ₹45,000.
     • An FD of ₹1,00,000 can get you a credit card with a limit of up to ₹95,000.
   • Banks like SBI, HDFC, Kotak, and ICICI offer such secured credit cards.
3. Maintain a Low Credit Utilization Ratio
   • Use less than 30% of your credit card limit. For example, if your credit limit is ₹50,000, ensure your spending does not exceed ₹15,000.
4. Make Timely Payments
   • Ensure you pay your credit card bills and EMIs on time. Consider setting up auto-debit instructions to avoid missing any payments.
5. Check Your Credit Report Regularly
   • Visit the CIBIL website to review your credit report periodically.
   • If you spot any errors or discrepancies, file a dispute immediately and get them corrected.
6. Avoid Becoming a Loan Guarantor
   • Refrain from becoming a guarantor for anyone else’s loan, as their default can adversely impact your credit score.
7. Limit Loan Applications
   • Avoid applying for multiple loans or credit cards simultaneously.
   • Every loan application triggers an inquiry into your credit score. Frequent inquiries can lower your score further.

By following these measures, Anil can expect his CIBIL score to improve within 6 to 7 months. Once his score reaches 700 or above, he will likely qualify for a home loan at a favorable interest rate.

Understanding CIBIL Score The CIBIL score ranges between 300 and 900. A score above 700 is generally considered good and increases your chances of securing loans at competitive interest rates. By being financially disciplined and managing credit responsibly, Anil and others facing similar issues can enhance their creditworthiness and achieve their financial goals.