You were in dire need of cash, had applied for a personal loan a few months back and got rejected due to a low eligibility score. Bad credit score was the main reason and this is not an ideal scenario to tangle yourself in. What exactly is credit score and why does it matter so much?
A Credit Score (ranging between 300 and 900) is a score assigned to you by credit bureaus based on how responsibly you handle credit and how diligent you are in repaying your debts and dues. Any score above 750 can make you the darling of all lenders while anything below that is not accepted by banks. Fintech lenders are somewhat relaxed when it comes to credit score, but even they will not accept applicants with scores less than, say, 600.
Credit bureaus get your track records and details of your credit behavior from the lenders and credit card companies you are a customer of. How many loans you have availed? Has there been any case of a bounced cheque? Have you been paying the EMIs on time? How often do you borrow? Do you often exceed the credit card limit? These are some of the questions to which credit bureaus like TransUnion CIBIL seek answers. Yes, late payment of EMIs, missed credit card payments, existing loans and higher percentage of debt-to-income ratio can put you in the list of credit defaulters.
Possible reasons why your name ended up in the defaulter bucket:
- Errors In Personal Info: Is your personal info (like name, address, PAN, Aadhaar No. etc.) submitted spelt and formatted correctly. If not, this could be a reason. Don’t worry. You can easily get them rectified by getting in touch with the CIBIL helpline.
- Delayed/Missed Loan EMI Payment: It’s bound to happen. Continuing to repay on time is the only way out. Even then it could take at least 6 months to move your score up.
- Incorrect Reporting By Lender(s): Sometimes your lender or credit card company might have overlooked to send/upload your reports on time or may have entered the wrong details. You can get this corrected as well.
- Bounced Cheque: This is a criminal offence and can negatively impact your credit score.
Remember, a poor score can make your chances of getting well-priced credit cards and/or unsecured loans pretty slim. So keep an eye on your credit report and be quick to report if you notice one or more errors on the lender or bureau’s part.