Stuck with Credit Card Debt? How to Improve Your Credit Score

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: Hello;

Partial settlement of overdue loans may affect cibil credit score.

But you may seek NOC from lender and submit it to Cibil.

Also if lender endorses the resolution plan of your loan and informs it to Cibil, it may help avoid the settlement status in your cibil record.

Best wishes;

Ans: Since your CIBIL score is now a strong 765, it reflects a solid recovery despite past issues. However, to further improve it, focus on maintaining a perfect repayment history for all current credit. Avoid closing old accounts with good history, as they contribute positively. Regularly monitor your CIBIL report to ensure no errors. Over time, consistent and responsible credit behavior will enhance your score further.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Understanding Your Current CIBIL Drop

Your CIBIL score was 761 earlier.

You took two loans to improve it.

Closed both within 6 months.

Now, your score has dropped by 24 points.

You are concerned why this happened.

How Short-Term Loans Affected Your Score

Loan closure too early signals credit instability.

CIBIL expects longer loan tenures for score strength.

Closing quickly reduces credit age.

It hurts your score more than helping.

Loan repayment history was too short to build credit.

What CIBIL Score Really Measures

It checks repayment behaviour.

Considers credit mix and utilisation.

Monitors credit history length.

Short loans give limited data to CIBIL.

It prefers consistent repayment over time.

Steps to Rebuild Your CIBIL Score Slowly

Do not take new loans now.

Focus on credit card discipline.

Maintain low credit usage, under 30% of limit.

Pay full dues on or before due date.

Set up auto-debit for EMIs or card dues.

If You Don’t Have a Credit Card, Get One

Get a secured credit card if score is low.

Use for small purchases.

Repay full amount each month.

After 6–9 months, score will improve.

Do not apply for multiple cards.

Avoid Frequent Loan Applications

Multiple enquiries lower your score.

CIBIL flags you as “credit hungry”.

Don’t fall for personal loan offers easily.

Wait 6–9 months before fresh credit moves.

Let the Credit Age Grow

Credit age is an important factor.

Older accounts help score grow.

Never close old credit cards.

Even unused ones with zero fee are useful.

Check CIBIL Report for Errors

Download detailed CIBIL report from official site.

Check if loans are correctly reported as closed.

See if any delayed EMI or missed payment shown.

If any issue, raise dispute with CIBIL.

Build Credit Mix Carefully

Credit mix means types of credit used.

A good mix has both secured and unsecured loans.

But don’t take loan just to create a mix.

Keep your financial health more important.

Avoid These Mistakes Going Forward

Don’t close loans early without purpose.

Don’t take loans just to increase score.

Don’t miss EMI dates.

Don’t carry credit card balance forward.

Don’t max out your cards.

CIBIL Score Growth is Slow but Steady

Credit score takes time to build.

Don’t expect changes every month.

Track every quarter only.

Do not panic with 20–30 points movement.

Focus on long-term responsible behaviour.

Why Credit Score Matters Later

Better score helps in home or car loans.

You get lower interest rates.

Also helps for higher credit card limits.

Employers and landlords may check score.

Maintain 750+ for best benefits.

If You Used Direct Loans or Cards Without Guidance

Direct approach lacks credit strategy.

Always work with a Certified Financial Planner.

CFP helps manage credit and investments together.

You can align credit behaviour to long-term goals.

Rebuild With Long-Term Financial Health

Don’t chase score only.

Build savings alongside credit history.

Have Rs 1–2 lakh emergency fund.

Start SIP in mutual funds monthly.

Use 50:30:20 budget rule.

Finally

Your CIBIL score drop is temporary.

It happened due to early closure of loans.

CIBIL expects long-term repayment track.

Don’t take loans for scoring purpose again.

Instead, use credit card wisely and repay fully.

Check report, avoid new enquiries, and be patient.

You will regain score in 6–12 months steadily.

Consult a Certified Financial Planner for overall money planning.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment