Your CIBIL score portrays your creditworthiness to the lender. It plays a significant role in the approval of different financial assets such as loans, insurance, the limit of credit card, etc. If you maintain a good credit score, you can avail of the benefits of having a good credit history. One of the milestones for reaching a good CIBIL score is to clear the debts or keep the debts low. Though clearing debts seem a difficult task for you, there are simple steps that can consequently help you to reduce bad debts with time.
Having bad debts can stand in the way of reaching a good CIBIL Score. Since CIBIL score and debts are interlinked parameters, it is essential to clear up your debts to improve your CIBIL Score.
Here are some simple tips that can help you in reducing your bad debts.
Ways to clear your debts
Review your credit report and fix up the errors
Monitoring your credit score is a good habit to follow if you don’t want any unwanted surprises. You can request for your credit report from different credit bureaus or check your CIBIL Score online. You should review the information in the report and check if all the payments you have made are noted down. In case of any error, you should seek ways to fix it immediately.
Use credit cards that are secured in nature
Using a secured credit card helps to build and rebuild your CIBIL Score. Unlike regular credit cards, you need to pay a one-time refundable deposit for a secured credit card. The maximum credit you can take through a secured credit card is equal to the amount of deposit. As the activities of a secured credit card are reported to the major credit bureaus, it helps you improve your CIBIL Score.
Opt for an alarm for EMIs
The timely payment of EMIs stands as a good sign in your credit history and, thus, improve your credit score. You can clear your bad debts by paying the EMIs regularly. You can pay higher EMI (if possible) to close your loans faster.
Make partial payments whenever possible
You can use extra seasonal income such as incentives, bonuses, etc. to make partial payments to your creditors. This helps you in clearing off debts faster. Making partial payments whenever possible enables you to lower your debts without any pressure. In some cases, it may even lower your EMI for loans.
Know your credit limits
Borrow only when you can afford it. Stop splurging with your credit card if you know that you cannot pay for it within the allotted time. It is advisable not to take new credits if you’re not sure of the repayment.
Opt for credit counseling
If you have bad debts, you should opt for credit counseling. It provides professional help to manage your finances and improve your CIBIL Score. They discuss the economic issues with you and suggest a personalized plan to clear your debts and maintain a good credit history.
Take precautions against credit repair scams
When dealing with bad debts, a credit repair company may seem to be a great escape as they remove bad credits from your credit history. However, there are thousands of frauds who can con you in the name of credit repair. It is advisable to stay away from such credit repair companies. Beware of a credit repair company if they are asking for a large fee before the service.
Try to save up
You can maintain a high yield savings account to deal with the substantial expenses instead of opting for credits. Setting aside a part of your income for emergency purposes can help you to avoid taking credits under specific circumstances. Moreover, saving up can also help you clear debts shortly.
Bad debts can impact your CIBIL Score and, consequently, your credit history. Thus, getting rid of them as soon as possible relieves you from the stress of your financial life. The above steps are easy to follow and can help you reach a decent CIBIL score and maintain it in the long run. A good CIBIL score provides you with the advantage of lower insurance premiums, lower rates of loan interest, and a good profile in the financial sphere.