What is your CIBIL score? Is it above 700 or closer to it? If not, then my friend, it’s best to take action to turn around your bad credit score now. It takes time to increase your CIBIL score. You need to repay the credit to improve your score. But how will you get credit without a good CIBIL score? Thus, you become a part of a vicious credit cycle.
But there is a solution to this! Before getting to the solution, it’s better to make you aware of what happens if you have a bad credit score to understand how crucial it is to improve it.
8 Negative Impacts of Bad Credit Score on Your Finances & Overall Life Quality
What is a bad credit score to lenders? It’s an indication that lending money to you can be risky. You may feel the heat of a bad credit score in the following 8 ways in your day-to-day life.
(This information is not to scare you but to make you aware that you can avoid all the consequences by being mindful regarding your CIBIL score)
1. Rejection of Credit Card/Loan Application
As stated, a bad credit score gets the lenders in alert mode. If they see defaults in your credit profile, it’s evident for them not to approve your credit card or loan application. It’s a big blow if you are in dire need of money and your loan gets rejected.
2. Difficulty in Renting an Apartment
It’s not impossible to get an apartment on rent with a low CIBIL score. But it certainly gets challenging. Some landlords are fine with a few non-payments. But some are more particular about the credit profile, especially if you are dealing with a property management company. You may need to pay a hefty deposit or find a co-signer.
3. High Insurance Premium
Many insurance companies consider your financial habits while assessing your profile. For them, bad credit is a risk they will take but at a higher premium. Your bad credit score may not affect your current credit-based auto or home insurance. However, it reduces the possibility of the lowest possible rate for your upcoming insurance policies.
4. Unavailability of Best Deals on Loans
This is one of the biggest disadvantages of your credit rating going south. You may get a secured loan with bad credit. But getting an unsecured loan becomes hard. Even if you get an unsecured loan, getting it on favorable repayment terms and interest rates is challenging.
5. Adverse Effects on Your Personal & Social Life
Money can’t buy happiness. But it’s almost impossible to lead a happy life without money. Therefore, the negative impacts of a bad credit score aren’t limited to your finances. A bad CIBIL score prevents you from getting credit when you need it the most and other benefits from the market. These kinds of situations impact your personal and social life.
6. Loss of Assets or Property
Your property and net worth could also go through the impact of bad credit. When you take secured loans such as home loans, auto loans, etc., you sign the terms, which give the lender the right to confiscate the collateral. You may lose your collateral if you default.
7. Loan on Higher Interest Rate
Your loan will likely be on ridiculously high interest rates and APR (annual percentage rate), with a bad credit score. That means you pay more for your loan than an average person. These expensive loans mess up your monthly budget and financial planning.
8. Trouble in Getting a Job in Financial Sector
Checking the CIBIL score before employing somebody is rare in India. But if you are applying for a job in the financial sector, your employer may check your CIBIL score to measure the level of your financial accountability. You may miss out on some good opportunities due to bad credit.
How to Improve Bad CIBIL Score?
Do you want to avoid these disadvantages of a bad credit rating? The only way out is to improve your CIBIL score, which is not easy but possible with strategic actions. First of all, recognize the culprit in your case. Is it the credit utilization ratio, late payment, or non-payment?
Contact your lender and discuss how you can turn around the situation. You can request them to offer you better repayment terms. Your score improves with each repayment. However, don’t be surprised if everything is right on your part, but there is an error in your credit report. You need to contact the officials at the bureau in that case.
Improve your credit behavior to keep your CIBIL score on track and live a financially secure life!