Is it possible for a person to have no credit score even when a few years before he had an excellent credit history? Can this change happen all of a sudden? What should one do if one finds himself in such a situation? Let’s get the answers to these questions.
As you may very well know by now, the credit score is a number that is generated based on the information that is recorded on your credit report. If you own credit cards or have taken some debts, then the lenders keep updating the information relating to your accounts to the bureaus. An impeccable payment history and a low credit utilization helps in raising the score. Information relating to late payments, too many debts, high utilization ratio brings the score down. But whether the information reported to the bureau is positive or negative it eventually falls off the credit report. In order to ensure that new positive information keeps getting added to your report you need to keep your credit profile active.
There may be situations like the ones given below, due to which your credit report wasn’t updated with new positive information. If such is the case, your score would show a downward decline.
- Overseas- If you travelled abroad for several years and closed all your credit cards and other debts before leaving, your credit history will start fading away. Credit bureaus in India only record information relating to accounts opened within the country. So if one plans to return back after a few years, and wants to maintain his CIBIL score, he must keep at least 1 account open and active, by charging few expenses every month and paying the full balance at the end of the billing cycle.
- No credit- If as a part of a debt management program, you decided to go all cash and stopped using credit cards or other debts, your credit score will start falling after a while.
- Using spouse’s credit- If after marriage, you closed all your accounts and depended only on your spouse’s credit, your own credit score will disappear over time. Without a good score, you will have a tough time getting approved for credit, in case you require it in future.
Check your free CIBIL report from the three credit bureaus and find out what your current situation is. If your credit score disappeared due to these reason, don’t despair. There are many ways to rebuild your credit history once again. But you will have to get back to taking loans and using credit cards. Here are some credit building ideas which can help you establish a good score once again.
- Secured credit cards- Without any credit score it may be difficult for you to get approved for usual credit cards. But in order to display good credit behaviour one needs to have an active account. A secured credit card is a good way to get a small credit line. You need to make a deposit to get this card, which basically serves as a credit limit. The deposit shields the card issuer from any risk of losing money due to non-payment of dues. Make regular on time payments on this card to ensure positive information gets recorded in your report. With a good payment history and low credit utilization you will see a raise in your score.
- Personal loans for low CIBIL score
Another way to build up on credit history is to take an instalment loan like a personal loan. There are many private lenders who given personal loans even to people with a low CIBIL score. They charge a higher rate of interest to cover up for the extra risk that they take to lend to individuals with a low score.
- Authorized user
If you become an authorized user on someone else’s card, the account information will be recorded in both the credit reports. On time payments and low utilization maintained by the primary card holder will benefit your score as well.
If you do not have any new account reported in the past 6 months, or an open credit account that is older than six months, your credit score will start declining and slowly disappear. That is why it is always recommended to keep old accounts active and open.