Your credit score isn’t final — Here’s how to bounce back from a low rating

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.

Credit score categories and ranges

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.

Bounce‑back blueprint: Simple yet powerful steps that work

1. Prioritise timely payments: Focus on repaying personal loan EMIs and credit card bills on schedule. This can enhance your credit score in gradual fashion. It is important to remember that improving your credit profile is a slow and gradual process. It takes discipline to bring your credit integrity back into balance.
2. Keep utilisation low: Even if you clear your balance each month, narrow utilisation ratios matter. Focus on keeping your credit utilisation ratio to less than 30%. This will always keep you safe from hard inquiries and it will also convey to the lenders that you are not entirely dependent on credit.
3. Avoid hard enquiries: Each personal loan or credit card application negatively impacts your credit score. Limit applications to genuine need. This way you will avoid several different hard inquiries within a short span of time. It will help you keep your credit integrity intact.
4. Maintain old accounts: Longer the credit history, stronger the trust. That is why don’t close aging personal loan or credit card accounts unless necessary. You need to convey to your future lenders that you have always been particular with your loan repayments.
5. Check your credit report regularly: Checking and carefully spotting and disputing errors can lift your credit score quickly. Proactive monitoring and asking legitimate questions from your credit bureau are signs of informed borrowing. That is why always speak up, discuss and get your credit related doubts resolved.
6. Use a mix of credit types: A manageable blend of credit card and personal loans can help more than having one type alone. The idea should be to showcase to your lender that you can efficiently manage different types of loans, credit cards, credit lines in an efficient manner.

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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