How To Improve CIBIL Score 2024 | Kharab CIBIL Ko Kaise Sudhare ?
Hello friends. In this video we'll discuss about
a very important topic that is how to improve
a poor CIBIL score. We’ll also discuss that if
someone has a perfect CIBIL score, then what factors they
should be careful about so that their CIBIL
score never worsens. So, in this video I'll discuss
all the points regarding this. One of my colleague in
bank is a credit manager. He explains it very beautifully,
that if someone defaults a loan– well, a credit manager
tackles a lot of queries everyday regarding personal loan,
home loan, car loan etc. So, whenever a customer
applies for a credit, the approval is given
by the credit manager. So, he once said something
very significant to me that if someone by
chance defaults a loan, it leaves a mark on their CIBIL. Well, any bank gives loan after
checking the applicant’s CIBIL report. So, when you default, it
becomes visible, quite like a mark. Whatever you do now, you can’t
remove this mark from your CIBIL report. Now, how can you
improve the CIBIL? The simple answer is that
you can extend the line.
Suppose, there’s a line and a mark appears
on it because you've defaulted a loan. So, when you extend the line – the mark won’t be removed
but it’ll become less visible. So, this is the only way for
anyone who has defaulted – I'll tell you all the points of how to
gradually improve CIBIL score, but before beginning
I wish to say that even though you've got a mark
here, you must start taking new loans.
The new loans will extend the line
and the mark will become smaller. In CIBIL – well, I don't
have the screenshots, but I saw on his system that whenever
the bank checks the CIBIL report – suppose, you apply for a loan which is the only time you've applied
for the loan and you default that. Suppose, then you
apply for a second loan. When your CIBIL report will be
checked, something like this will appear. Suppose, you've taken
a loan from HDFC Bank , then it'll be written
there properly – suppose it was an
auto loan or car loan, then it will be
written as 'auto loan', and it'll also be mentioned
if you've made 60 EMIs – Suppose, you've taken the loan for 5
years and paid 12 installments out of those. This will also be mentioned there – it'll
show 12 EMIs and there'll be ticks below them. If and when you start defaulting,
those EMIs will be marked with cross.
That means every information about your each
and every EMI goes to the credit manager. So, when we take new loans – suppose, like the previous one, that
's your first loan, had 60 EMIs. Had you paid all
these 60 EMIs on time, then in your CIBIL report it would be
mentioned as “60 EMIs paid out of 60”. Do you get it? Again, suppose,
someone defaults 1 EMI, then when the credit
score will be checked it'd be mentioned properly that 59
EMIs have been paid on time out of 60.
Anyway, I'm going to tell you
about this further in the video. . First, let's start
from the basics. Look, very often we
use the term CIBIL score. But what is that CIBIL? Well,
there're different companies – the first one which is the
biggest, is TransUnion CIBIL. Except this, in India there are the
companies named Equifax, Experian and other one is CRIF High Mark. So, these are some
different companies. All the banks there in India –
suppose, you have account in SBI, and throughout the month – SBI,
ICICI, HDFC all the banks in India keep the reports of
all their customers. For example, SBI has
50 crores customers. They send the updated reports of their customers
in every 30-45 days to these companies – their transaction history, CIBIL score, if
they had taken any loan, if 15 EMIs are paid – sorry, it's not 15, as the report is of 30.
days, i.e. the report will be based on 1 month.
So, it's mentioned whether
they've paid that month's EMI or not, whether they'd paid in time or defaulted
in the previous month – whatever there is, every updated report of every
bank is sent to those companies. Let me tell you one thing that let’s forget the three companies below –
they are not that significant companies. The main company
is TransUnion CIBIL. The term 'CIBIL score' comes from
this company – TransUnion CIBIL. So, we'll consider
this company mainly. Now let's assume, SBI has
sent all its data to the company. Let’s take an example that SBI
has a customer, named Rajesh. Now all his data has gone to
the company (TransUnion CIBIL) that how many
transactions did he do in SBI, if he has any loan and whether it is paid
within time or not – all these data is sent. Let's suppose, Rajesh
applies in ICICI bank, though he doesn't have any account
there nor has he done any transaction. Now Rajesh wants to take
home loan from ICICI bank. Suppose, Rajesh feels that
ICICI’s home loan is the cheapest.
Now ICICI bank doesn't have anything
of Rajesh except the PAN card no., as he has applied
for loan recently. So, where will ICICI go to collect his
data? They'll go to TransUnion CIBIL. Where TransUnion CIBIL
got its data from? From SBI. Why? Because Rajesh
has an account in SBI. Suppose, he has a loan running or whatever,
or not, whatever is his track record was given to
TransUnion CIBIL by SBI, and TransUnion CIBIL will
give the data to ICICI bank. Now ICICI‘s credit
manager will judge on the basis of their credit
score, income, transaction history whether ICICI will grant
this person a loan or not.
So, the first thing is that this is
how the CIBIL score operates. Another thing I
should tell you here – suppose, there's a customer
who has taken a car loan, let's say, for 5
years or 60 months. Now, everything was going fine,
and he was paying his EMI on time. In the first year, he
pays all the EMIs on time. After completion of a year, unfortunately,
he bounces the first EMI of that year. For some reason, he couldn't
pay that installment on time. So, as soon as he missed that monthly
installment, in the very next month – suppose, he was paying the
EMIs of a car loan taken from SBI – SBI would send a report to TransUnion
CIBIL saying that his score is 'SMA 0', which stands for 'Special
Mentioned Account 0'.
It means that the person
has missed one instalment. Now, if this person misses
another installment next month then the next report that would be sent will
say SMA 1 or Special Mentioned Account 1, meaning that this person
has missed another instalment. If this person misses another installment the
next month, then the report will be SMA 2, meaning that this person has missed
3 installments now, 90 days in a row. If a consecutive 4th installment is
missed, then the report would be say 'NPA', that means, this loan has now
become a nonperforming asset. Any loan that is defaulted
for more than 90 days, according to the RBI, becomes
a nonperforming asset or NPA.
Now, when the person misses the first
instalment, the credit score becomes SMA 0, but even if the person pays 2
installments together the next month, this SMA 0 tag will not be
removed from the CIBIL score ever. Even if this person clears this loan and 2-3
years later applies for a different loan, his status will show this SMA 0 tag which
the credit manager will easily notice. It'll be clearly visible that at least on
one occasion this person had defaulted. And if there is an
'NPA' written on the tag, it'll means that this person had
missed 3 consecutive payments of EMI. So, these are small blots. So, the tag of SMA
0 gets attached to him and he pays both the installments
in the next month on time. But the mark will remain, which showed that
he had bounced one EMI. So, these are tiny things that I'm telling
you about. It's only the basic structure, then we'll move
on to the next topic. Another thing, a lot of
websites will tell you that – well, CIBIL score is a
number between 300 and 900.
If someone has a CIBIL score of 800+,
then we can say it's a good CIBIL score. The bank will give this person a loan easily
and that too at a lower interest rate. If someone has a score
between 650 or 750, then, the loan application
could well be rejected, and even if you get a loan,
the interest will be too high. In a lot of websites, they say that a
CIBIL score from 300 to 550 is a poor one; from 550 to 750 is average, and
more than 750 is a good CIBIL score. I won't name any names, but a lot of,
so-called good websites, have mentioned this. I prepared this PPT with the help
of my credit manager colleague who told me that
those days are gone. In present times, an 800+ CIBIL score
is considered excellent by the banks, and the bank gives loan
to such person quite easily. Even if someone has a score of 750+,
it's considered average by the banks. That is because, nowadays, getting
credit or loan has become easier. Every other person manages to get
a loan from somewhere or the other.
Therefore, banks consider a CIBIL
score of 800+ an excellent score. Now, let's come
to the main topic. The first question is if someone has a
poor CIBIL score, how does one improve it? If there was a bad debt in the past,
if someone had defaulted in the past, and because of that, the CIBIL score has
come down to 550 or 650 for whatever reason – how can this be improved? First thing is that you've defaulted a loan,
and naturally the CIBIL got poor due to this. So, no bank would provide
you an unsecured loan. You think you will apply for the
ICICI Bank's Amazon credit card, and your application is
rejected. You will try again. When that gets rejected, you apply
for the Axis Bank Flipkart credit card, the SBI Cashback credit card,
and you keep getting rejected. You apply for every card,
thinking at least one will be granted.
The mentality of the people
with poor CIBIL scores is that, they'll apply everywhere,
hoping one would accept. Now, try and understand one thing.
You're applying to SBI, Axis Bank, ICICI. Where are they getting the data from? They're
getting it from TransUnion's CIBIL score. Now, if you're applying again
and again despite rejection, in banking parlance, this
is called eager for credit. You are hungry for a loan, and
that's why you're applying everywhere. This behavior brings your
score down even further. Once your CIBIL score is down
you will not get an unsecured loan – no one will give you a personal loan,
nor will anyone issue a credit card to you.
What you need to do is get
yourself a secured credit card. A secured credit card means you need to open
an FD in your bank, even if it's just Rs.10,000. You then take a credit
card by pledging this FD. This is the first step, as there is
no risk of rejection at this stage. The first thing you need to do
is obtain a secured credit card. For the next six months, avoid
applying for any other credit cards. All your spending should be routed
through this secured credit card. Most banks will offer you 90% of
your FD amount as your credit card limit. For example, if you open a Rs.10,000
FD, your limit will be Rs.9,000. As you are getting
interest from FDs If you open an FD of 50,000
your Credit Card limit will be 45,000 Use the credit limit you
receive for all your spending, as this helps gradually
improve your CIBIL score. If you make purchases
and repay on time, your credit line will increase
along with your timely repayments.
The first step is to get a
credit card against your FD. The second secured option is to open an FD
and take an overdraft (OD) limit against it, which you can
then use as needed. so, you can take a secured limit In some cases, you may find a 'pay later'
option, like those offered by Amazon or Paytm. You can accept a small unsecured
limit, such as Rs.10,000 or Rs.20,000, but only if it's offered to
you—don't apply for it proactively. You should avoid
attempting this. For instance, if you have an
AU Small Finance Bank account and apply for a personal loan, it may be repeatedly rejected, which will negatively
impact your CIBIL score. Remember to prioritize
secured options first. You can start with a secured
credit card or a gold loan. For instance, taking a gold
loan for Rs.10,000 or Rs.50,000, even though it incurs interest, can help improve
your CIBIL score. These are the options you can
consider, including the 'Pay Later' option. If you're looking to apply for a
loan, start by approaching NBFCs. For example, Bajaj's EMI
Card is quite popular nowadays Although it's a good card, it is mainly
usable in offline stores rather than online.
Previously, it could be used both
online and offline with 0% interest. The advantage of this card is that it provides you
with a credit limit regardless of other factors. Although I've created a
dedicated video on this topic, I'll include it on the end
screen for you to check out. In that video, I explain the
details about the Bajaj Card. I knew someone with
a very poor CIBIL score who still received a
credit limit of Rs.75,000. You can start using it gradually. You can choose it from
the options I've provided. You need not apply
for loans repeatedly Essentially, you should get a credit
card and start using it for your spending. If you come across a 'Pay Later' option
that is commonly available and pre-approved, you should take advantage of it. You can approach any
NBFC like Bajaj Card Apart from this, as I start
spending from these options I used these cards or
took a loan against the FD After six months, I
have to wait for my bank First thing is, you
will get calls to apply The caller has a target; he
only had to forward your lead He is not bothered whether
you get the loan or not Suppose, you get a call from an
ICICI Customer Care representative He would say you are
getting a pre-approved offer He will share a link to apply But these are not pre-approved
offers as you may think there are no pre-approved
offers from ICICI Bank The objective of the
representative is to generate lead You will enter all the details in the
link sent by him and his job is done His target is achieved irrespective
of you getting the loan or not Your loss is you have
shown interest for credit here But as your CIBIL is poor,
the request will be rejected The employee's job is done but
your case has worsened further What you need to do is and see if there is a pre-approved
loan offer in the mobile banking app To start with, it will only show small
pre-approved amounts like 20 or 25 thousand.
So, for a start, you are spending
from your secured Credit cards The day you see a
pre-approved offer, accept it immediately
without delay and they are certain to
come after six months The bigger banks like HDFC, ICICI or SBI will
not offer You can get pre-approved loans quickly. You can try with
smaller private banks like IndusInd is quite famous
for pre-approved loans You can shift your
Bank Account to IndusInd as they are quite known to offer
pre-approved loans to their customers However, if your
CIBIL score is very low, you should start by obtaining
a secured credit card. suppose, you are doing
transactions for six or seven months then Indusind Bank is a good
option as their offers are good You need to open a Zero
Balance Savings Account with them and start transacting gradually I will share the account
opening link in the description I will also add the video link for the
Bajaj card for a detailed understanding Another question is If someone has a healthy CIBIL
score, what should they keep in mind? One key point is to ensure
that payments are made on time.
I have seen several high-net-worth
industrialists or factory owner His installment per
month is 3 lac rupees and along with that, he has
opened another hotel the loan value was 4 crore
and the EMI was around this only It happens that he forgot to pay he used to pay EMI through
check which he forgot to drop the same is repeated
for the next month Now his two EMIs are due He had also taken an
overdraft limit from the bank I used to manage his limits I informed him that he had
missed payment for two months He was nonchalant about it
and confirmed to pay next month If you default your
EMIs due to ignorance He is not aware of SMA-0 or SMA-1
or the impact on the CIBIL Score The more rich the person,
the more he falls for ignorance If your CIBIL score is very good,
do not default on your repayments You must always pay on time Suppose, you have a
credit card with a 1 Lakh limit It is not that you use
it for 90 or 95 thousand You must use only 30-40%
of your available limit i.e.
on a limit of 1 Lakh
use only 30-40 thousand Repay it and then
use the card again utilize only 30-40%
of your card limit Do not use the full
limit of your credit card Another thing is the
longer you take the loan, the better your
credit score will be Suppose, you have taken
a loan for fifteen years One, you pay all your EMIs on time
and complete the loan in fifteen years secondly, you took it for 15
years but reimbursed it within a year the CIBIL score of the second
person will be less than the first Because we know
more about his credibility He has taken a loan,
paid EMIs on time It means that his
income source is better Suppose, a person is a business owner
who earns 2 lakh rupees every month On the other hand, we have a government
employee earning 50,000 every month The bank will trust the
government employees more It is because his source
of income is quite strong government will pay
him salary at all cost The businessman earning
2 lakh today is good but the bank would not know whether he would
earn the same amount after three-four years I am talking about
self-employed people If this person were an employee of a private
organization earning Rs.2 lakh a month, the bank would likely trust him more
compared to a self-employed individual.
These are some factors There is one more things I've seen this with a relative: SBI debited Rs.25,000
from his credit card. He may have mistakenly
accepted a link on his mobile. His approach was to refuse to
pay the Rs.25,000 to the bank, arguing that he hadn't made the
transaction or received anything. However, if you don't pay, even
if you believe it's not your fault, it's your CIBIL score
that will be affected If something like this happens I've seen people express frustration with banks over
small transactions, such as a Rs. 500 or Rs.1,000 Even if you've repaid a loan on
time, failing to collect the NOC and missing a small due amount
can result in it growing to Rs.1,000.
If you then visit the
branch and refuse to pay, it will negatively
impact your CIBIL score. While you might think that by not
paying, you're teaching the bank a lesson, the reality is that the bank employee will seek
approval from higher authorities to close the loan. However, this will be
recorded as a loan settlement, which can severely
damage your CIBIL score. You might believe that the
bank has closed the loan account, but in reality, your CIBIL
score will be damaged. You should clear
the loan in its entirety. Settlement is one thing someone who cannot
repay personal or home loan suppose, someone
has 5 lahks personal loan He has settled the loan
by paying only 2 lakh banks may negotiate to 2.5 lakhs and say it might improve the
CIBIL score after settlement Even if you pay 4.99 lahks
and go for a settlement although you may have paid only
1,000 less, your CIBIL will be impacted and if you settle the
same loan with 50,000 only then also your CIBIL will
be impacted the same Your CIBIL score will remain
healthy if you repay your EMIs on time.
However, if you
opt for a settlement, whether it's for Rs.1,000
or Rs.1 lakh less, the impact on your CIBIL
score will be the same. The only advantage of a settlement
is that it closes your loan account and stops bank representatives
from visiting your premises. If you're opting for a settlement,
aim to pay as little as possible. For example, if you've defaulted on a Rs.5 lakh
personal loan and the bank offers a settlement, you could settle for
Rs.50,000 to Rs.1 lakh. You don't need to
pay the full Rs.4 lakh, as the CIBIL impact will be the same regardless
of whether you settle for a smaller amount. Suppose you've taken a secured
loan, such as a home or car loan, where the loan is
backed by an asset. For a home loan, the
house serves as collateral; for a car loan, the
car is the collateral; and for a gold loan, the
gold is held by the bank. In contrast, for unsecured loans like credit cards or personal
loans, there is no collateral. The bank relies solely on
your CIBIL score for trust. What this means is that having more secured loans
generally contributes to a better CIBIL score.
Another factor to consider is the
number of loans you have taken, whether for a car, home, personal loan, or
credit cards. If you have multiple loans, banks might perceive that
you're relying heavily on credit, which can negatively
affect your CIBIL score. with a good credit score, do
not take loans from everywhere lastly, check your
CIBIL score periodically we call it a soft check which does
not impact your CIBIL score If you are checking your CIBIL
score yourself, it is not considered bad But if you are applying for loans at
different places like ICICI, SBI, Axis and getting rejected bank will check CIBIL on your
behalf and this is called a Hard Check this will impact
CIBIL negatively Lastly, avoid being a
guarantor for anyone. Sometimes, banks require
a guarantor for a loan— such as a car loan. If you
agree to be a guarantor and the borrower defaults,
your CIBIL score will be impacted.
It's better to avoid this risk. These are some key
points to consider. I hope you found
this video informative. This is the end of the video— thank you for watching,
and thank you all!.
