Hello, I want to asked about CIBIL Score.Requesting your kind help to guide me. Thank you.

Ans: When applying for credit or loans, it's essential to check your credit score from multiple bureaus to ensure accuracy and to understand how different lenders may perceive your creditworthiness.

While all these bureaus provide valuable credit information, individual lenders may have their preferences for which bureau's score they rely on. Therefore, monitoring and maintaining a good credit profile across all major credit bureaus can increase your chances of approval for loans and credit cards.

Ans: I'm sorry to hear about the challenges you faced during the pandemic, but I'm glad to hear that you've taken steps to address your financial situation. Rebuilding your credit score after experiencing defaults can take time, but it's certainly achievable with patience and dedication. Here are some steps you can take to begin the process:

Check Your Credit Report: Start by obtaining a copy of your credit report from all major credit bureaus (CIBIL, Equifax, Experian). Review the report carefully to understand the factors contributing to your low score and identify any errors or discrepancies that need to be corrected.
Pay Bills on Time: Moving forward, ensure that you pay all your bills, including credit card bills, loans, and utility bills, on time. Timely payments are one of the most crucial factors in rebuilding your credit score.
Reduce Credit Card Balances: Aim to keep your credit card balances low relative to your credit limit. High credit utilization can negatively impact your credit score, so focus on paying down your credit card balances as much as possible.
Limit New Credit Applications: Avoid applying for multiple new credit cards or loans within a short period as it can indicate financial distress to lenders. Instead, focus on managing your existing credit responsibly.
Diversify Your Credit Portfolio: Having a mix of credit accounts, such as credit cards, installment loans, and a mortgage, can positively impact your credit score. If feasible, consider diversifying your credit portfolio over time.
Use Secured Credit Cards: If you're struggling to qualify for traditional credit cards, consider applying for a secured credit card. Secured cards require a security deposit, making them easier to obtain for individuals with damaged credit.
Monitor Your Progress: Regularly monitor your credit score and credit report to track your progress. Many credit monitoring services offer free credit score tracking, making it easier to stay updated on your credit health.
Remember, rebuilding your credit score is a gradual process that requires consistency and responsible financial behavior. By following these steps and demonstrating responsible credit management over time, you can steadily improve your creditworthiness and regain financial stability. If you need further assistance, consider consulting with a financial advisor or credit counselor for personalized guidance.

Ans: You have an outstanding credit card debt that hasn't been cleared for three years. This has negatively impacted your CIBIL score, and you are concerned about how clearing the debt might affect your score.

Impact of Clearing the Outstanding Amount on CIBIL Score
Positive Impact: Clearing the outstanding amount will positively impact your CIBIL score over time. Your credit score improves when you settle debts, demonstrating responsible financial behavior to lenders.

Time Frame for Improvement: While clearing the debt will help, it may take a few months for your CIBIL score to reflect the improvement. Consistent, timely payments in the future will further boost your score.

Steps to Close the Credit Card Without Further Impact on CIBIL Score
Negotiate a Settlement: Contact the bank and negotiate a settlement for a lower amount. Ensure that the settlement is reported as "Paid in Full" rather than "Settled," as "Settled" can negatively affect your CIBIL score.

Full Payment: If possible, pay the full outstanding amount. This will ensure the account is closed cleanly and positively influence your CIBIL score.

Obtain a No Dues Certificate: After clearing the outstanding amount, request a No Dues Certificate from the bank. This document serves as proof that your account is fully settled.

Check Your CIBIL Report: After settling the debt, regularly check your CIBIL report to ensure the payment is reflected correctly. If there are discrepancies, raise a dispute with CIBIL.

Maintaining and Improving Your CIBIL Score
Timely Payments: Make sure to pay all future credit card bills and loan EMIs on time. This is crucial for maintaining and improving your CIBIL score.

Limit Credit Utilization: Keep your credit card utilization below 30% of the credit limit. High utilization can negatively affect your score.

Diversify Credit: Having a mix of secured (like home loans) and unsecured credit (like credit cards) can positively impact your score.

Monitor Your Credit: Regularly monitor your CIBIL score and report. This will help you stay informed about your credit health and take corrective measures if necessary.

Final Insights
Clearing your outstanding credit card debt is the first step towards improving your CIBIL score. While it might take some time for your score to reflect this improvement, consistent and responsible financial behavior will ensure a positive impact. Negotiating a settlement or paying the full amount, obtaining a No Dues Certificate, and monitoring your CIBIL report are key steps to closing the credit card account without further negative impact.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in