After settling your debt, improving your CIBIL score may seem difficult. But with proper planning, this can be achieved. Read on for the 5 tips to improve your CIBIL score after settlement.
What is Loan Settlement?
Loan settlement is when the lender accepts to receive a loan amount less than the actual due amount. The lender waives this amount after understanding the underlying reasons for loan settlement. The reasons may include an accident, loss of employment, illness, or any other unavoidable circumstances.
5 Tips to Improve the CIBIL Score After Settlement
Here are the 5 tips to improve CIBIL score after settlement:
1. Pay Bills Regularly
You must
consistently pay all your bills on time. Clearing all dues, credit
card bills, and other outstanding EMIs or debts within deadlines
must be a priority. This exhibits your credit handling reliability
and financial responsibility, positively impacting your credit score.
2. Continue to Utilise Credit Cards
Most people stop using their old credit cards, fearing reduced CIBIL
scores. This is a misconception. Your credit behaviour reflects your
credit score. So, if you don't use your credit cards, your credit
score may worsen.
3. Maintain A Low Credit Utilization Ratio
Credit utilization is the ratio of the credit that you are
currently using of the total available credit. You must try to keep
this ratio below 50%. Constant high credit utilisation may indicate
financial instability and impact your credit score.
ALSO READ :- How Can I Get a 900 CIBIL Score?
4. Establish a Mix of Credit
Having
a varied mix of credit can positively impact your CIBIL score.
Having only one type of credit account can hamper the perception of
your financial health. You must always try to diversify your credit
usage by obtaining a Personal Loan,
credit card or auto loan instead of just going heavy on one. Having
said that, it is necessary to borrow what you can comfortably repay.
5. Avoid New Credit Applications
A
hard inquiry is triggered each time you apply for a new credit card
or loan. You must avoid making multiple credit applications within a
short period. It may give the impression that you are unable to
manage credit and finances.
To Conclude
Improving your CIBIL score after settlement requires patience, consistency, and financial strategy. By paying bills regularly, keeping credit utilisation low, building a credit mix, and avoiding new credit applications, you can rebuild your score gradually.