What Are The Reasons Behind a Low CIBIL Score?

Having a low CIBIL score? The CIBIL Score, which ranges from 300 to 900, is a numerical summary of your credit history, ratings, and report in three digits. The higher your credit score is, the closer it is to 900. If you have no (or little) previous borrowing history and no track record to evaluate your creditworthiness, CIBIL will assign you a score of 0 or -1: A CIBIL score of 0 indicates that information about the borrower's credit history is only available for less than six months.

If you have a low CIBIL score, it is not the end of the world. By taking the necessary steps, you can raise your credit score. Maintaining a good credit score necessitates strict credit management. A realistic time frame for credit repair is 4-12 months. To achieve your credit goal, all you need is patience, determination, and self-discipline. You can only check your Free CIBIL score for free once a year on the official CIBIL website.

It is very important to have a considerable CIBIL score if you want to take a personal loan or any other type of loan.

Reasons for low CIBIL score

There is no credit history:-Individuals with a poor credit history will undoubtedly have a negative impact on their CIBIL score. However, if you do not have a credit history to show, you will not have a CIBIL score.

History of Payment:- Our payment history is one of the factors that contribute to a low CIBIL score. Delays in loan payments or paying only the minimum amount on a credit card bill will lower our credit score. If you default on our loan EMIs or make late payments, this results in bad credit and a drop in your credit score. If you default even once, it may have an effect on our CIBIL score. If you are a frequent defaulter, your score will suffer as a result. Aside from that, inconsistent and irregular payment will have a negative impact on the credit score.

Several Loans:- Individuals who take out multiple loans at the same time have a negative impact on our credit score. The reason for this is that because you applied for multiple loans at different banks, your debt burden has increased while your ability to repay them has decreased.

This is a source of concern because it affects the CIBIL score. This is true not only for taking out loans, but also for using credit cards. If the number of credit cards issued, as well as the amount owed, increases, so does the ability to repay the loan.

Loans in the Wrong Combination:- It is critical to have the right loan mix in the credit portfolio.

The right loan mix implies having a good mix of secured and unsecured loans in your basket. Having only unsecured loans is disadvantageous to one's CIBIL score. Unsecured loans are those for which no collateral is provided to the bank.

Secured loans, on the other hand, are those in which collateral is provided to the bank in some form or another in exchange for the loan. If you are unable to repay the loan, the bank can encash the collateral by selling it and receiving the cash needed to repay the loan.

High Credit Utilization:- It is a common misconception that if you pay your credit card bills on time, your credit score will not suffer; however, this is not the case. Even if you pay the due amount in full within each billing cycle, if you spend more than 45 to 50 percent of the total credit limit that has been sanctioned, this indicates that our credit utilisation is significantly high and is lowering our score.

This occurs because you are using a lot of our credit to pay the credit card bills, affecting our ability to pay the loans.

How Can I Improve My CIBIL Score?

Some suggestions for improving your credit score include:

1. One way to improve your CIBIL score is to pay off credit card balances on time.
2. Reduce your use of credit.
3. It is best to avoid applying for an excessive number of new credit cards.
4. Maintain awareness over your credit report.
5. Choose from a variety of credit options.
6. Increase your credit limit.
7. Maintain Old Debt on Your Report.
8. It is not a good idea to apply for multiple new credit lines at the same time.
9. Be Consistent and Patient in Your Approach.