what is credit repair and how it works

The Ultimate Guide to Understanding Credit Repair

May 20, 2024 • 494 views

Credit repair helps in restoring your creditworthiness and improving the chances of getting loans in favourable terms. It involves the identification and resolution of inaccurate data regarding your personal details, account details, credit details, etc. Read on to learn everything about credit repair and the errors in the credit report that lead to a poor credit score.

How to Initiate Credit Repair?

Credit repair can help in improving your credit score that is damaged due to the presence of errors in your credit report. Check out the following tips to initiate credit repair:

1. Take a Look at Your Credit Report

Access your credit report from any of the credit bureaus in India and carefully inspect it to identify any error that can potentially harm your credit score. 

2. Resolve the Error

If you identify any error, immediately report the mistake or missing information to the credit bureau. Provide evidence to support your claim and wait for verification. With CIBIL, this credit repair service is free.

3. Sign-up for Auto-Payments

Generating an auto payment facility with your financial institution will help you make payments on time. The timely repayment of the minimum amount on your credit account will help to avoid late payment penalties, improving your credit score.

4. Settle Past Due Amounts

To initiate credit repair, settle your past due accounts by negotiating payment terms with creditors. Paying off overdue debts can improve your credit score considerably by demonstrating responsible financial behaviour. Explain your financial situation to your lender and discuss possible options to clear your outstanding debt and rebuild your creditworthiness.

5. Repay Debt Obligations

Exercise a habit of making timely repayments. To manage your finances easily, you can create a budget and set aside a fraction of your income to repay your debt obligations. In case you face any financial challenges, you can opt for debt consolidation. Consolidating all high-interest debts into a single Personal Loan helps decrease your financial burden.

6. Do Not Apply for Multiple Credits

Applying for multiple credits at the same time projects you as "credit-hungry". This can make it challenging for you to avail amazing loan offers. Moreover, applying for too many credit facilities generates hard inquiries that can potentially harm your creditworthiness. To avoid such a situations, you must avoid applying for credit too frequently.

7. Limit Your Credit Utilisation Ratio

Credit repair works successfully when you limit your credit utilisation ratio. Aim to utilise not more than 30% of your available credit limit. This will demonstrate responsible credit management and improve your credit score over time.

8. Seek Professional Assistance

If you are not confident or unsure about where to start, let a professional guide you in this journey. Seek help from a credit counselling agency or credit repair service. They can help you navigate through the intricacies of the credit journey, enabling you to make informed decisions while improving your credit score and overall financial well-being.

9. Maintain a Healthy Credit Mix

Maintaining a diverse mix of credit including unsecured loans, secured loans and revolving credit to establish an image of a responsible credit user. It helps to showcase that you can manage various debt obligations, making you an attractive applicant. This will help you improve your credit score over time and help you avail loans with lower interest rates, flexible tenure and other benefits.

Checking your CIBIL score becomes convenient when you rely on Poonawalla Fincorp’s free CIBIL score checker tool.

Also Read - Details of Top Credit Bureaus/Credit Rating Agencies In India

Types of Error in Credit Information Report

Errors in your credit report can lead to a drop in your credit score. Here's a list of errors in your credit report that you must identify and rectify:

1. Inaccuracy in Personal Details

A personal information error occurs when your name, contact details or residential information is inaccurately updated. Even minor issues in such details can lead to questions about your real identity.

2. Incorrect Credit Enquiries

The presence of credit inquiries that are ingenuine or not listed accurately can potentially harm your credit score while also impacting the accuracy of your credit report. 

3. Fraudulence and Breach of Identity

Not keeping your personal information secure can make your credit report accessible to fraudsters and identity thieves. They can misuse the information to apply for credit without your authorisation, leading to a negative credit score.

4. Delay in Payments

Errors in your credit report can include missing details of EMI payments and mistakes that show closed accounts as open. If your payment history is not recorded properly, it can negatively impact your credit score for a long time, preventing you from accessing better loan terms.

5. Errors in Account Details

The occurrence of any error regarding your account number, payment history or outdated information can make it harder for you to qualify for attractive loan deals.

6. Discrepancy in Credit Limits

A fault in your originally set credit limit can cause damage to your credit utilisation ratio, eventually resulting in a negative credit score.

Also Read - How CIBIL Score is Calculated | A Step-by-Step Guide

To Conclude

A thorough understanding of how credit repair helps you better navigate the landscape of credit facilities. It is recommended to keep an eye on your credit report to identify any errors and resolve them at the earliest. To monitor your credit score, use our free CIBIL score checker now!

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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