Well first things first, a credit score of 500 is not good news. However having said that, do keep in mind that it is also not the end of the world! As you may be aware credit scoring is done on a scale of 300 to 900 and higher the score is, the better it is for you. Any score below 700 could spell trouble if you are looking at getting a loan sanctioned or even getting a new card or a job. So if you are reading this, it means you are looking at working on your score and trying to make it better.
Get Your Credit Report:
Even though you know that your score is low, not much can be done till you get a thorough look at your credit report. The credit report gives a detailed and comprehensive view of your overall debt position and also lets you analyze your credit history. Going through your credit report will help you identify the cause/s for your score being low. You may sometimes be aware of the problem but it is always better to get the report and identify the reason/s for the low score. A score of 500 will not be caused due to a few missed payments or excessive use of credit card in a month or two, the cause is likely to be more serious.
Clean Up Your Act:
Going through your report will let you identify the problem areas that are the cause of the low score. Once you have that information you need to start working on these aspects. So if you have an open loan that you have paid fully, then get the NOC so that it is closed in the credit report too. Pay old dues but make sure the accounts are reported as closed and not settled; a settled account will raise red flags in the minds of all future lenders. If you have been irregular in paying your dues, going forward you need to start paying on time as this is the most important component of CIBIL score calculation. Also keep a look out for any erroneous reporting that may be causing the score to dip.
Have a Disciplined Approach:
Once you have zeroed in on the cause of the low score and how to deal with it you need to have a disciplined approach if you want your score to improve. If the cause is high credit utilization ratio then you need to exercise restraint when using your credit card. You need to fix a limit to your credit card usage and then you need to stick to it. The same applies to paying your dues on time, as we said above this aspect influences the credit score to the maximum extent. Make sure you pay all your EMIs and card dues on or before time, always!
Another aspect to bear in mind is that credit scores do not improve or go down overnight. The score is a reflection of your credit history which starts from your first card or loan. So if you have been an irresponsible borrower in the past and are looking at improving your score, bear in mind it will take time especially if your score is 500. Being disciplined and patient are keystones of improving your CIBIL score, so be responsible in the future and don’t hope for miracles. Though loan for low CIBIL score is an option offered by few lenders yet it is not advisable to do so as it can cause further damage to your already strained credit health. Wait for the score to improve before you go out looking to borrow further.
Seek Professional Help
You can definitely try to improve your score on your own but if you feel that things are too complicated or you are unable to identify the cause of the low score then you can seek professional help in trying to improve your score. Here it is important to remember that no one can remove any negative item from your report, professionals can only help you identify the problem and offer you a solution. Being disciplined rests on you, they cannot offer you quick fixes but they are better equipped to deal with such situations. .
As we said earlier, though the score of 500 is low and is definitely a cause of worry, however there is no reason to despair as you can work on improving it.