Cibil score is important part of our life in modern life. Do you know why credit score is important. The simple answer of this question is, because every one need loan or credit card to fulfil their needs. Banks do not offer a loan or credit card with bad credit score. If a person do not return loan on time then it will create troubles in his financial carier and it spoils his Cibil Score . Today in this post we will explain, “How long it takes to improve a Cibil score after defaulting a loan account ” .
Table of Contents
What is Cibil Score and Why it is Important
Cibil score is a credit record of a person which is shared by banks to cibil companies. Cibil companies store this record online on their servers. It is openly accessible by finance companies and banks to check someone’s credit history. Cibil score or credit history started in 2001 in India. This score is not available beyond 2001 . This data is linked with pan card, aadhar card, mobile number and email address.
These companies give rating score to a person’s credit history. This score starts from 350 to 900. Lower the score is the symbol of bad score and higher the score is symbol of good credit history. That’s why good credit score is important for getting loan or credit card from any bank or NBFC.
How Many Companies Store Cibil Score in India
There are four companies store Cibil score in India. Here are the name of companies
- TransUnion
- Equifax
- Experian
- CIRF
These all companies are authorised by RBI. These companies can keep credit information in their record.
CIBIL Score Range and It’s Importance
The minimum Cibil score starts from 350 and it goes highest 900. Finance institutes has created three categories of these score . The first category is 750 and above, second is 650 to 750 and third is below 650 . Here is the importance of these all categories.
750 an Above – Banks consider it a best credit score category and this score can get any loan or credit card easily.
650 to 749 – It is a medium score and banks consider it for loans. This score category can get loan but interest rate may be higher than first category .
Below 650 – This category is considered as bad score. It is very hard to take any loan under this score category. Yes, customer can take loan from NBFC companies on high interest rates but very hard to take loan from nationalized banks.
Impact on Cibil Score Due To Loan Default
Pay your loan EMI on time and avoid to spoil your credit history. If you don’t pay your loan EMI or credit card on time then bank sends your credit score to credit buero. And due to that
Your Cibil score will start falling down immediately.
You can’t apply for new loan or credit card due to bad Cibil score.
It may impact your credit score for at least 6 month or 2 years.
Other Reasons of Cibil Score Down
There are many other reasons due to those Cibil score may down.
Guarantor – If you are guarantor of any other’s loan and that loan becomes default, your Cibil score may impact due to that guarantee.
Creating multiple queries for Cibil score may decrease your score points. It means, if any bank or credit card provider raises a Cibil score checking inquiry, the query they raise short span of time may weak your Cibil score.
Credit Card Bill Not Paid – If your credit card bill is not paid on time, it will decrease your Cibil score.
Multiple Loan or Credit Cards – If you have opted multiple loan or credit cards, and this credit limit more than your earnings, it may impact your score.
How to Improve Cibil Score
- Pay your dues on time
- Do not late your loan EMI
- Do not late your credit card bill
- Make a balance between your income and credits
- Never cross your credit limit
- Think twice while becoming guarantor for someone
- Always ask for NOC after completion a loan amount.
- Be careful while using new credit limits
- Always check your credit reports timely.
How much time it will take to improve a bad Cibil score
It depends on the credit utilisation habits. If you have paid all pending dues, it may take 6 months to 2 Years to improve a Cibil score. But all late payments will show in to your credit history. Your credit history will always shows the total payments paid on time and total payments paid after bill dates. So, be careful for your Cibil score in advance.
Conclusion
If you make a proper strategy and pay your pending dues, and regular make an eye watch on your credit scores, definately you can improve your Cibil score in a short time of period.
FAQs
Q. Will a bad Cibil score Fix for ever if a loan defaults?
Ans. No, if you pay your all pending loan EMIs and pay your credit card bill on time, sooner your Cibil score will improve
Q. Is it possible to check a Cibil score in free?
Ans. Yes, there are many websites such as policybazzar.com, PayTm, and Google pay which provide this service in free.
Q. How much time it takes to improve a Cibil score?
Ans. – If you follow right strategy to improve your Cibil score, hardly it will take 6 months to 2 years to improve a bad Cibil score.