Improving CIBIL Score After A Credit Card Settlement Takes Time
A credit card or loan settlement refers to the settlement that takes place between the credit card or loan holder and the financial institution or bank that issues the card or loan to the customer. A settlement happens when the customer is unable to pay the outstanding balance on his or her card and thus the bank offers an overdue settlement.
This means that the cardholder now has to pay only some part of his overdue balance and after he has paid it, the bank shuts down the card account of that person. After this, the customer does not have any worries regarding paying his overdues.
However, this peace of mind is only transisent on the customer, as it directly impacts his CIBIL score. This is because the bank reports this sin on the part of the customer to the credit bureau, which is CIBIL (Credit Information Bureau of India Limited). And, in turn, CIBIL reduces the credit score of that person, thus doing justice to the financial system.
Thus, a credit card settlement has a negative effect on your credit score as well as your credit report. However, through some ways, you can repair your CIBIL score. So, if you have also gone through a credit card settlement, how can you improve your CIBIL score? This is how you can do it.
1. Pay Down Balances
It is very likely that people who have poor credit own several accounts and credit cards that have already maxed out. If you also are one such person, then you surely must pay down the balances on those cards as soon as possible.
One of the other things that impact your credit score is the available balance in your credit card accounts. You must keep your balances less than 30% of the maximum limit that you get on your credit card. This way you can bump your CIBIL score. If you exhaust your maximum limit and leave the balance on your card for months, then it can have a negative effect on your credit score.
2. Make Regular Payments
This is one of the most important things that you must do for improving your CIBIL score after a credit card settlement. You must start paying regularly again. In the first case, you got into trouble just because you made late payments or even missed some of the payments altogether.
And now you do not want to repeat that mistake again. So, learn from your mistakes and adopt good paying habits by getting back on a payment agenda. Make full payments on time every month for years. This will take time, so do not just pay for some months and then leave it.
3. Get New Credit
Do not stop using credit cards just because you have gone through a credit card settlement. You still need to use credit to rebuild your CIBIL score. Open a small credit card account and use it. And, pay off its balance every month.
If you find trouble getting a new credit card, then opt for a department store card, gas credit card, or a secured credit card. And, ensure that the issuer of the card reports your account activity and handling on that card to the credit bureau, otherwise it is of no use.
4. Build New Habits
Get rid of your old credit habits and build new credit habits. Otherwise, you will end up where you were prior to your credit card settlement stage. For this, you must make sure that you do not buy items that you cannot afford and must pay the balance in full and on time every month. Ensure that you do not default on any of your credit card accounts, even the small ones.
5. Make Good Credit
Practice good credit habits for years. Remember that your credit score would not improve till creditors know that you are doing everything to build a good CIBIL score. This means that you must quit charging products that you cannot afford or stop making only the minimum monthly payments. Additionally, you must not take several credit cards during your rebuilding period, as it will get difficult for you to handle multiple payments and balances. Instead, get started with just 1 or 2 credit cards.
By following these tips, you can boost your CIBIL score back above 600 in just 2 to 3 years. So, get started with rebuilding your credit score as soon as you can after a credit card settlement. CreditSmart will always be here with daily tips every step of your journey back to credit health.