A sluggish or a weak credit score can prevent approval for personal loans or credit cards. This can easily force you to pay steep interest rates on relatively less flexible loan products. Hence, a very low credit score and difficult loan terms, high interest rates all cumulatively act as a cycle. Still, with discipline, composure and efficient planning you can turn this around in your favour as a sensible borrower.
Therefore, to bounce back in such a case a borrower must go back to the basics and try to control fundamental things such as making credit card payments on time, never skipping EMIs, avoiding high interest personal loans etc.
Credit landscapes: Where you stand as a borrower
Credit scores follow a scale of 300 to 900. These scores are provided by leading credit bureaus such as CRIF High Mark, CIBIL, Equifax among others. A score below 600 is widely considered as poor, whereas a score of over 750 is considered excellent.
Note: These credit score ranges are illustrative and may vary slightly across lenders.
Why do credit scores drop and how RBI helps fix them?
Late payments, high credit use i.e., credit utilisation, and too many loan applications in a very short period of time can lower your credit score. The RBI has now mandated lenders to update credit data twice a month, by the 15th and end of the month. Credit report errors should be fixed quickly by credit bureaus. If this is not corrected on time, the lender may be held responsible. These rules help identify and resolve issues faster.
How much time will it take for your credit score to rebuild?
You will start witnessing considerable improvement in your credit scores manifesting within four to eight months of sustained effort. Consumers who carefully monitor their gains often witness gains in as little as six months.
Hence, with commitment and discipline along with RBI’s strong oversight, a low credit score is not a setback. It is simply the start of your comeback.
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