This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in
Many of you must have checked your CIBIL credit score sometime in the past and for some of you it must have got a surprise either positively or negatively. Some of you might have been caught unaware of a credit card account running in your name with annual charges being levied year after year. Some of you might have undergone for a loan settlement with the lender which could have impacted your score quite negatively.
But to your surprise, some of you could have found your credit score to be quite high, despite defaulting a couple of times. This is due to some unique but scientific methodologies being adopted by CIBIL to calculate your score.
Factors that negatively affect Credit Score:
1. Late payments or defaults in the past: Your payment history has a significant impact on your credit score. So, if you have missed payments on any of the existing loans over the past couple of years, then the credit score would get negatively affected as it indicates you are facing difficulties in servicing the existing obligations.
2. High utilization of credit limits: You must remain quite careful while using the credit limits available on your credit cards. A higher and higher utilization pattern against the available credit limits is an indication of an increased repayment burden and may negatively affect your credit score. Lower outstanding balances getting reflected in your credit card statements improve this score.
3. Higher percentage of Credit Cards or Personal Loans (i.e. Unsecured Loans): A higher number of unsecured loans coupled with a high utilization would also affect the score in a negative way because of the fact that these unsecured loans carry a very high rate of interest as compared to secured loans like home loans or car loans and result in larger payments and higher defaults.
4. Behaving Credit Hungry: If you are behaving “Credit Hungry†(i.e. in an urgent need of money) and have applied for new credit facilities with a large number of lenders, then it is going to affect your score negatively and make the lenders more cautious while evaluating your application for a fresh loan.
Can your CIBIL Credit Score be improved? If yes, how?
As I mentioned in my earlier post, it is like a CAT examination. Like you can always improve your CAT score by appearing for the exam again, your CIBIL credit score can also be improved, but not overnight. If you have taken a 20-year home loan which is just a couple of years old and you’ve defaulted on your EMIs 3-4 times since the beginning, then it will probably take you at least 2-3 years or probably more than that with regular EMI payments to improve your score. You will have to maintain the greatest of financial discipline in order to secure a better credit treatment in the future. Here is how it can be done.
Measures to improve your Credit Score:
1. Pay your loan EMIs regularly in a timely manner to maintain a clean credit history: Try to keep a diligent track of your EMIs in case you are running more than one loan.
2. It is highly advisable to make full payments on your credit card instead of just the minimum payment. In case it becomes very difficult to pay the bill in full, at least make the minimum payment without fail.
It takes you a longer time to build your credit history with a loan as compared to a credit card as these loans are usually for a longer tenure whereas a regular payment of your credit card bills can help you start building a good credit score as you keep on making the regular payments. A credit card debt is categorized as a revolving credit and it helps in building a good credit score faster if the payments are regular.
3. Do not apply for an extra credit card unnecessarily when your bank’s relationship manager approaches you to get one and actually you do not require it. Applying for an extra card or a loan without any requirement would mean more credit exposure and reaching near the card’s credit limit would result in a lower credit score.
4. If you have been issued a credit card but you have not used it very frequently or the utilize credit limit has been very low, then this would affect your credit score in a positive way as unused credit cards actually imply that you are financially secure.
5. You should use special incomes like bonus or a monetary gift or some other source of savings for the prepayment of some of your existing debt. Early repayment of debt also helps in improving your score.
6. Avoid becoming a joint account holder or a guarantor in a loan or a credit card facility as any default would lower the quality of your credit score.
7. Avoid going in for a settlement or “write-off†of your loan accounts as it implies that you have not been able to pay the past dues. Keeping the credit history clean improves your credit score.
8. You should keep reviewing your credit history on a regular basis to ensure that the credit report accurately reflects your current financial status.
At the end of the day, common sense should dictate what you do with your financial life and good financial habits along with awareness of credit scores will help you build a good credit history and a good credit score.
Dear Sir,
past i was self employed and now i am a salaried person and got 50000 per
month from 6 years but my Cibil Show i am self employed how change it and my one credit card with Citi bank since 1997 and it is written off ( settled) on September 1998 so this reason i cant get a card from any bank please suggest how can i improve
Dear sir,
yesterday i saw my Cibil it is 747 but i have an another question i had been a credit card with citi bank and i settled (written off) on sep 1998 and its reflect in my cibil report how can i improve it
Sir,
I have taken 02 personal loan from ICICI,BANK in the year of 2007, &2008,both loan has settled and paid accordingly the settlement of bank after exempting Rs:- 2800.00 for one loan & Rs 4800.00 for another.
The ICICI BANK duly issued No DUES CERTIFICATE, but wrote in CIBIL as remarks “SETTLED” Please advice me how could I erase or change the remarks settled in Cibil.
have taken the personal loan fromPAN NO. ABSPY0194Q ICICI BANk, HDFC BANK and settled 3 years ago. Its really hindering the chance of getting the loan for me. Now I am looking to remove the Settled word from the CIBIL report.
Can I get the second chance from the Bank to pay the pending principle and ask them to close this in CIBIL?
Regard
YANIL KUMAR
9700416680, y999anil@gmai.com
Hi my civil score is 500, and filled as an defaulter. i have not paid credit card loan intrest for past 7 months. If I now settle the full intrest how long it takes to not an defaulter and wat will be the score.please guide me how long it takes time to get civil score After full payment.
Hi,
Since the time i have been using credit facilities i.e. credit card, personal loan finance etc, I have not bounced a single payment but few months back i cleared all the dues on my credit card somehow i was shock the on one of my card they reflected a due of Rs.25oo/- as some foreclosure fee which i had already paid by making access payment and also confirmed by the bank customer care. Now these guys keep on issuing new statement every month with all kind of late fee etc. and are not resolving this issue from 7 seven months, on calling upon customer care they agree that i have made an access payment so their is no due on card and on other hand they keep on issuing new statement everymonth.. On putting a request mail to bank they always keep on requsting for more time and this is affecting my cibil score? Pls help. Also let me know if this issue gets resolved would my cibil score be back to what it was and will it affect my furture transactions with the banks? Thank You.
sir,
please confirm the pre approved lone mean & how much time in process the lone
thanks
hans raj
I settled a credit card in Jan 2014 due to some financial crisis. I have currently going through 1 home loan and 1 credit card for which I am paying it on time till the time I had taken. Home loan I had taken 1 and half year back and none of my ESI has been bounced and 1 credit card I had taken 5 years back and making payment on time. I have to apply for personal loan, please advice if it is good time to apply or bank will reject my application.
Hi sir,
This is Rahul Sharma. My father has home laon and car loan. From the september 2014 we couldn’t pay the EMI properly. Now i tried for car loan then bank executive told me that u can’t take loan becuase your father name is in CIBIL list.Now we are in good financial condition and will pay EMI time to time. How we can remove my fathername from CIBIL list? Can i take loan again?Actually i am just 25 yrs old. Plz replyme as soon as possible.
Eagerly waiting for your reply.
Thanking you
I have an hdfc saving account with negative bal due to non maintenance of min bal. Account was dormant. Does it effect my cibil report. ?
No
Dear Sir,
Iam in very critical situation due to my Cibil report,lot of times my personal loan applications got rejected.Main reasons are below:
1)I was having two credit cards from SBI and HDFC due to over burden i was not able to pay the minimum dues on dates and its paid very lately.Later I come to know I paid the lot of excess money as minimum dues, thats what I put those cards for settlement.SBI card totaly paid and got no due certificate,HDFC two EMI will pay coming months.
2) I was having a housing Loan later I paid it early due the sale of property
3)Some personal and Agricultural loan from Banks, those are alrady paid, but the same still showing in Cibil report.
Please help to find out the soluations to solve my Cibil issues.Really Iam trapped.
SANTHOSH KUMAR.A
My cibil score is 595 as I hav settled my credit card payment. If I make full payment to bank now so my cibil score will increase or not ?? If yes dan by how much points???
Dear Sir,
In month of Dec’14, i took CIBIL report with NH, when i applied the personal loan that is get rejected, due to CIBIL score, when i applied the CIBIL score it shows as NH (3 reasons given) It is new account for CIBIL like that but how can cibil will give two type of report to bank & me
Hi, i have settled 3 credits cards and 2 personal loans and paid all emi of two wheeler loan.I have settlement letter of all banks.Currently i have taken car loan from Mahindra Finance and paying emi on time since last two years without any bounce.My current cibil score is 609.Kindly advice me how could i improve my Cibil score,i have settlet all credits cards an loans in 2012 and still its all showing in CIBIL record,is it withdrawn after certain period of time?what is the process to submit settlement letters of banks to Cibil for updatation.Is it possible to take home loan in future.
Regards
Amar Deep
9910333680
Hello sir,
I had a cc 6-7 years back which had an outstanding of Rs. 2500. I somehow missed this payment. In 2013 the credit card company made an entry indicating default payment because of which my scroe came below 600. However I have closed this and I have a NOC from the bank and my score is 820 now. However in my cibil report the dpd Details for this payment is indicating that I had defaulted the payment. Will this affect my future loans. Is there anyway I can have this dpd detail removed
I have an existing loan which I am clearing on a regular basis with no defaults. also I had a loan about three years ago which I cleared without defaults. I wanted to know that I have missed only one payment on a credit card and once I cleared the patent the very next day I also closed my card this was about a year ago. Now my query is that the bank asked me a few no the ago if I wanted a card and I said ok. But the application got rejected twice due to a address discrepancy. After which I stopped trying. But will these two attempts and the one late payment adversely affect my score.. Because I am looking to study in a year or two and would definitely have to use lending products for that. Also NY present loan is for 5 years and I am only on year one. But I am in a position to clear that loan in two months but have been told that if I preclude a loan points of my score would be deducted. Is this all true.. I’m a little confused..
Dear sir,
My earlier CIBIL score is 674. After that i have tried few times for PL. Now my score is 590. Now only I came to know that is because of credit hungry. Is there any way to improve my CIBIL score sir. Can I approach any credit repair agency or wait for some time? Pls help me with your guidance sir.
Hello Sir,
I am Avinash below is my scenario and Present Cibil Score:
1. In April 2013 I have taken 50,000 Personal Loan from HDFC BANK for 12 Months, I have missed installment 3-4 times, I have cleared this loan in November 2014 instead of April 2014, I have Cleared all the dues whatever asked by Bank done full payment and I have NOC for this.
2. I was having HDFC BANK Credit card, I have missed many times payment of card dues, Bank Permanently blocked my Card, I have paid all the dues whatever asked by bank done full payment, I am having NOC for this Credit card.
3. In July 2013 I have taken 50,000 Auto Loan from Bajaj Finance for 10 Months, I have missed installment 3-4 times, I have cleared this loan on 31st December 2014 instead of June 2014, I have Cleared all the dues whatever asked by Bajaj done full payment and I have NOC for this.
Right now I don’t have any credit card or loan, I have fetched my Cibil Score on 10th February 2015 and the score is 593 only.
How much time will it take to increase to 750 mark, Moreover How much time will it take to update my 3rd loan status in Cibil that I have mentioned as that I have cleared on 31st Dec 2014.
Could you please suggest me some ways to improve my score.
Thanks,
Avinash
Dear Sir,
I think you are the best one to answer my question ? I have taken an Auto Premium Loan from HDFC Bank. the Loan amount is 13 Lacs for Five years and I have paid all 48 Installments till april’2014. I am in deep financial crisis, even i do not have money to have my food, due to wrong investments and trust. I sold my house, property all the assets. Since Last 11 Months i have not paid any single installment of the same, the amount of Installment is Rs.27,700/- per month. Now i do have some money, to clear the outstanding Installments. Same is the question with my credit cards from HDFC / ICICI
My question I do not want to go for settlement I want to pay all the dues including Penalty and Interest to both ICICI & HDFC… Would my CIBIL score would be back to normal if i pay each and every penny ?