Credit Repair – Improving your CIBIL Score from 600

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My CIBIL Score Is 600. How bad is it?

Jitesh got a shock of his life when his loan application was denied. The reason they cited was something to do with CIBIL score. And Jitesh was like-

What on earth is CIBIL?”

He spoke to a few banking officials as well as researched quite a bit about credit bureaus in India and how CIBIL works. He had no idea that every one of those ‘seemingly minor’ defaults (including the one 5 years ago) was stealthily recorded, which led to his poor credit score.  

Now many of us have been in Jitesh’s place. All we can say about the 600-score is, it could have been worse. Lenders in India are quick to dismiss any score below 630 as poor and reject loan and credit card applications. A poor credit score effectively indicates to banks that the applicant is quite likely to evade EMIs or repayments, and hence should not be trusted.

According to the most recent data, more than 15 percent of the CIBIL scores in India fall between 600 and 649, and around the same number range from 550 to 599. The impact a 600 score will have on your fiscal life relies on the effort you put into ‘damage control’ – that is, credit repair or improving your CIBIL score.  

Find out why your score is 600:
If you are wondering why your score is 600 and cannot think of any reason, get your credit report. Few know that a credit report can be obtained from any credit bureau in the country for free once a year. Perhaps errors on your reports have pulled down your score considerably. Or there could have been a mix-up of information. These could be easily rectified by filing disputes. There might even be a couple of solid reasons you overlooked; but you can work on those and be careful in future. Do remember that default history is not something you can fix easily in a short span of time.

Curious case of ‘improved’ CIBIL score:
If you have been struggling to build your credit and have finally crossed 600, it shows that you can easily reach a point that makes lenders sit up and take notice of you. Trust us, it is possible. So don’t be disheartened. Otherwise you will end up paying more to take out personal loans (in the form of higher interest rates), which you will be forced to accept due to lack of options. But nowadays, there are many alternative lenders in the field and they have no qualms in offering loans to people with say, 650 CIBIL score. These Fintech startups can be your saviors until you get your score right.   

What you should do?
You may have heard that availing loans or swiping credit cards and then paying off the EMIs in stipulated time, is one way to build your CIBIL score. Strange as it may sound, it is absolutely right. However, that does not mean that you take on unaffordable debts either. Use credit cards or avail loans only if you are sure that your loan amount will be sanctioned. Each loan application, whether you get the amount or not, can bring your score down, albeit temporarily. And it is pointless to risk that without getting the money you seek. The best suggestion we can give is not ground-breaking but pragmatic- remember to pay on time and pare down your credit card(s) dues. We suggest that you use no more than 40 percent of your total card limit. This is one sure-shot way to be ‘credit-worthy’ for credit card and loan products with kinder rates and friendlier terms.

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