Good for you if you’ve had enough of being embarrassed about your poor credit and are ready to work on improving your cibil score. Even if it seems difficult or nearly impossible to bring your score up at this point, the passage of time and positive steps you can take right now is on your side when raising your cibil score.
At the same time, it’s crucial to avoid common mistakes that can hold you back when trying to improve your credit so you can get loans, better credit cards, and lower interest rates.
Not Reviewing Your Cibil Report
Before you can improve your cibil score, you need to know the factors on your report that are dragging down your score. For example, there could be errors on the report that you can correct to improve your cibil score.
You can get a free copy of your report. You can also get one free copy yearly from the three major credit bureaus.
Falling For A Cibil Repair Scam
If a for-profit company tells you that it can remove negative information from your cibil report for a fee, don’t sign up for its services. “The truth is that no company can legally erase information from your file if it’s accurate,” according to the central credit bureau. The repair scammers are eager to prey on desperate people, but you can remove errors for free by contacting the creditors who reported the inaccurate information.
Failing To Dispute Credit Card Errors
When you see errors on your cibil report, always contact the creditor in writing to have the inaccuracy removed from the report.
Maintaining High Credit Card Balances
Did you know that your credit utilization ratio – the percentage of revolving credit debt to your available credit –accounts for around 30% of your cibil score? A high utilization rate lowers your credit score, while a lower utilization rate typically raises the score.
Keeping your credit utilization rate at no more than 30% is wise. So, if you are running balances on one or more credit cards, pay as much as possible on them to get those balances down or paid off.
Making Late Payments
Another major factor in your cibil score calculation is payment history, which accounts for around 35% of your score. To improve the same, build a positive payment history by making all credit card and loan payments on time.
But what about those old accounts that have been dogging you for the last five years? The good news is that adverse payment history on a cibil account automatically drops off your report after seven years, so the passage of time and making timely payments on current accounts can raise your cibil score significantly.
Making A Payment On An Ancient Debt
One of the worst things you can do while trying to improve your credit is making a payment on a “time-barred” debt that falls outside your state statute of limitations. Making a payment can restart that debt, keeping that adverse payment history on your cibil report for years longer than if you hadn’t made a payment.
The statute of limitation laws on debt varies by state and averages three to six years, according to the Federal Trade Commission (FTC). To find your state statute of limitations, contact your state attorney general’s office.
Closing Positive Credit Accounts
If you have a history of charging too much on credit cards, closing these accounts may seem like a good idea to resist temptation. Still, according to the experts, keeping paid-off accounts is usually better.
For one thing, paid-off credit card accounts help your cibil utilization rate. Older positive account history on your cibil report also works in your favor.
Submitting Too Many Applications
As your cibil score improves, you may be eager to find out what creditors think of your score, but applying for a new credit card every week isn’t an excellent way to monitor creditworthiness. Too many “hard inquiries” from creditors in a short period can lower your cibil score.
Find here how a Philadelphia credit repair company can help.
What Is Credit Restoration?
Credit Restoration is a way to repair your history to improve your overall score. It is based on several variables, and making a few changes to your debt management strategy can fix it. So, let’s start!
A cibil score is your debt management process. The following factors decide your credit score –
- Payment history
- Credit utilization
- Length of the history
- A mix of different types
- Recent applications
How Long Does It Take To Repair Credit?
How long it takes to repair your cibil score depends on your history of it and the severity and timeline of any negative marks in your report. For example, if a high utilization ratio hurts your score, paying down revolving balances can improve it quickly, perhaps within a month. On the other hand, if missed payments have dragged your score down, it may require several months of on-time payments to see favorable changes to your score.
One of the fastest ways to improve it is to dispute false or inaccurate information in your credit report. As mentioned above, reporting agencies are legally required to complete an investigation into your dispute within 30 days.
Suppose the agency determines your dispute is legitimate. In that case, the discrepancy should be removed from your report almost immediately, and your score should change the next time the agency calculates the same.
While building your credit back up can seem daunting, there is light at the end of the tunnel. By continuously implementing responsible financial practices, you can start to rebuild your score. You may see some results quickly, but the whole repair process may take months or years, depending on where you’re starting.
Remember to focus on good habits from here on out to protect the gains you make so you don’t ever have to look into how to repair your credit again.