The importance of CIBIL score is no longer a secret. It is an indicator of one's financial stability and it is used at several places to predict one's future financial behaviour. Your past credit usage habits determine whether you will be responsible with your finances in future. There are several ways in which your CIBIL score affects your financial life.
CIBIL score is the first thing that is checked when your loan application is evaluated. Many lenders have a minimum threshold requirement below which the applications are rejected. A low CIBIL score indicates that you weren't handling your past debt obligations responsibly. Hence it greatly reduces the chances of obtaining future loans.
A low CIBIL score does not go well with the credit card issuers either as it increases the risk of defaults. Even if you get approved for some card, they will give low credit limits and charge high interest rates to compensate for the greater amount of risk that they are exposed too.
A low CIBIL score may even hold you back when you are seeking out a job. Many companies, especially those in the finance sector check a person's credit score as a part of background check. A low CIBIL score may result in your non-selection even if you were otherwise qualified for a role.
Nowadays it has become a common practice among landlords to check your credit score to gauge the risk of frauds or defaults. A low CIBIL score indicates that you haven't been paying your dues on time. This may put you in a bad light and prevent you from getting a house on rent.
If you find yourself stuck with a low CIBIL score, do not despair. There are several steps that you can take to get your finances back on track if you have bad cibil rating.
Check your credit report to identify the reason for your low score. Is it missed or late payments, over utilization of credit limit, or too many new credit accounts. Analysing your credit report will give you a direction in which you need to work upon. It will even help you identify any mistakes on the part of bureau that may have been the reason for a low score.
Work on establishing a good payment history- Since timely payments make up 35% of your score this is the most effective way of improving credit score. If you start paying your credit card bills and EMI payments on time, the effect of your past mistakes will begin to diminish.
Credit card balances attract a very high rate of interest leading you in a debt trap. They also lower your score since utilization ratio has a major impact on the credit score. Freeing up your credit limit by paying the outstanding balances on credit cards will help improve your score.
But sometimes a person finds himself in a catch 22 situation, wherein he needs to take on debt to show that he can pay it off responsibly, but a low score stands in the way of loan approvals. In such situations you can rely on personal loans for bad CIBIL score. It is easy to obtain these loans from private lenders who approve of these loans even if you have a low score. They look at several other parameters for credit assessment that go beyond a credit score like income, job stability etc. But they do charge high personal loan interest rates to shield themselves from the default risk. Such personal loans for bad CIBIL score will not only help you meet your financial needs but also help you work towards improving your score. Making timely payments on these loans will help you restore your credibility.
Just remember patience and persistence is the key. Do not expect a miraculous change in a few months. It will take a little more time before you will be able to see things turning around.