Credit card and loan approvals are largely influenced by the individual’s CIBIL score since it is proof of the individual’s credibility. The three-digit CIBIL number falls between 300 and 900. Credit profiles that are closer to 900 are more reliable. When an individual seeks loan assistance or credit card approval from any bank, it plays a very important role. First and foremost, it is used to determine whether a person is reliable. As if you were ranked and liked by the bank.
CIBIL score is calculated by analyzing various factors including payment history, number of loans taken out, types of loans, outstanding debts, and credit history.
The bank determined whether a person was a responsible credit card holder based on his or her own CIBIL score. It takes time to improve your CIBIL score after credit card bill settlement. In order to maintain a good CIBIL credit score, you must understand what destroys it and what builds it. The best way to avoid ruining your CIBIL credit score is to repay any debt or loan on time and in full. Find out if a loan settlement can ruin your CIBIL credit score and what to do if you have already done one.
Many people confuse “loan settlement” with “loan closure”. The labels are different. CIBIL credit scores are influenced by both. CIBIL calculates your credit score based on all your payment-related activities reported by lenders or financial institutions. As your financial behavior changes, so will your CIBIL credit score.
How can you raise your CIBIL score after paying off your credit card debt?
A high CIBIL score makes you likable and eligible for a loan and credit card, so one should have a high CIBIL score to impress bankers. Don’t lose heart if you have a low CIBIL score. You can really improve it if you follow these expert tips.
- Make the “Settled” status “Closed” – You can improve your CIBIL score by changing your credit card company’s “settled” status to “closed”. To do this, you must pay all your dues once and for all. As ‘Settled’ indicates that an individual has not fully cleared his or her debts, it has a negative impact. We suggest you contact your bank or credit card company if your dues are extremely high and you cannot pay them all at once. Negotiate a certain amount within your means that is equally desirable for your bank or credit card company. The ‘closed’ status in your CIR will definitely have a positive impact on others.
- Keep your credit card balance at the right level– CIBIL scores are also influenced by your credit card available balance. A high CIBIL score is achieved by using only 30% of your credit card limit. You will have a negative impact on your CIBIL score if you exhaust your maximum card limit.
- Make regular payments– CIBIL scores are also influenced by your payment history. Paying all your dues and balances on time is the easiest way to improve your CIBIL score. A cardholder who pays on time has a higher CIBIL score than one who delays payments.
- Apply for a credit card against any fixed deposit account- An alternative way to improve your CIBIL score is to apply for a credit card against any fixed deposit account if you have a low one. Your fixed amount does not need to be huge. You can also start with as little as Rs. 25,000. A credit card with a maximum limit of 90% of the fixed deposit amount will be issued by the bank. Spend no more than 30-40% of your card limit when using this card regularly.
- Repay all outstanding balances- Your CIBIL score will be affected if you have outstanding balances on your loans or credit cards. As you delay paying off your outstanding, your CIBIL score will decline. Do not postpone your outstanding payments; it will only weaken your credit score. Don’t have a craving for credit – It is often observed that people apply for credit repeatedly; this indicates that you are hungry for credit and negatively impacts your credit score. Another major reason for a low CIBIL score is buying multiple credit cards. Having multiple credit cards makes it very difficult for you to make timely payments, which ultimately puts a financial burden on you. Therefore, your CIBIL score is poor.
- Make smart use of your credit card- Credit card holders are known to spend a lot with their credit cards without considering the consequences later on. Many cardholders don’t even know how to use their credit card correctly, which results in a negative CIBIL score. Credit cards should only be used 30-40% of their total credit limit each month. This spending limit will keep your payout balance affordable, and you can easily avoid pending payments.
- Pick the right kind of loan- Your CIBIL score is also affected by the loan you take. A loan can be secured or unsecured. These loans are used to acquire or build assets that are stable.
- Home loans are secured loans- While unsecured loans are used to acquire depreciating assets. An unsecured loan might be a car loan, vacation loan, or credit card debt. An unsecured loan has a negative impact on a person’s CIBIL score, while a secured loan has a positive impact. CIBIL score is positively impacted by a portfolio with 80% secured loans and 20% unsecured loans.
- Prioritize good credit habits – A good credit habit pays off in the long run. You must follow good credit practices for years if you want to earn a high CIBIL score, as only then will your creditor trust you. One should always practice good credit habits, such as not using multiple credit cards during the rebuilding period, not overspending, and making timely payments, to improve their CIBIL score after settlement.
- There’s no need to hold back- Your credit card has just been settled. Disappointing. Don’t hesitate to use your credit card. Your CIBIL score must be built by all means if you wish to improve it. Rebuilding your credit is not recommended while you are rebuilding. You should use your credit card within limits during your rebuilding period. Obtain a low-balance credit card and pay off its dues on a monthly basis.
- Get a NOC from your card provider- A NOC from your card provider is recommended if you are closing any card. Neglecting to take a NOC definitely affects your CIBIL score. A A NOC demonstrates that a cardholder is trustworthy and has received a clean bill of health from the bank. After closing a card, always obtain a NOC from your card provider within 45 days.
Improved and high CIBIL scores have many advantages
People with high CIBIL scores have many advantages over those with low CIBIL scores. High CIBIL scores give you a variety of advantages, including:
- Quick and easy mortgage approvals
- The individual will have easy and quick mortgage approval with a high CIBIL score. CIBIL scores indicate the credibility of an individual, and banks do not hesitate to approve a mortgage request raised by someone with a high CIBIL score. The credit card company will offer you a low-interest rate if your CIBIL score is high.
- Approval of high limits in an instant -No one is granted high credit card limits by banks. The approval is contingent on a number of variables. If you have a high CIBIL score, however, it would be an easy and hassle-free process.
- A low-interest rate on home and car loans -With a high CIBIL score, individuals are guaranteed low-interest rates on car and home loans.
Questions about Loan Settlement and CIBIL Credit Scores
Q) CIBIL credit report settlement – can it be removed?
Ans: Yes, of course. Contact your lender if you have settled any loans in the past. Pay off your unpaid debt and request a “No Objection Certificate” from your lender. CIBIL will be updated by the lender. Additionally, you can also file a dispute on the CIBIL website showing that the debt has been paid off completely. After 30-45 days of dispute resolution, the status of the settlement will be revised.
Q) Does a one-time settlement affect my CIBIL credit score?
Ans: Definitely. Your CIBIL credit score will be affected by a one-time loan settlement. If your lender or bank offers you a loan settlement, you should be careful. As a last resort, it should always be avoided. Don’t settle for a one-time loan repayment. Instead, look for alternatives.
Q) Does CIBIL’s credit score improve after loan closing?
Ans: Your CIBIL credit score will increase if you have paid all the EMIs of your loan on time. By closing the loan on time, you demonstrate that you are a responsible borrower who pays off all debts on time and in full without fail. Therefore, in order to protect your CIBIL credit score, you should make all repayments on time.
