Winning a lottery is like a dream come true. If you are one of those lucky few who have won lakhs or crores of rupees in a lottery, you may be wondering its impact on your life. Well, just having the money will not put an end to all your financial woes. How you put it to use is what determines its effect on your financial life. Does winning a lottery affect your CIBIL rating in any way? Let’s find out.
Correlation between credit score and wealth
The income level of an individual or his bank balance has no effect on his credit score. People with a high net worth may not necessarily have a high credit score. The credit score calculation primarily factors in one’s payment history and credit card usage behaviour. So even if a person has a huge bank balance, he will not have a good CIBIL rating unless he makes timely payment of his loan EMIs and credit card bills.
The wealth of an individual may be taken into account when a person seeks approval of a loan application. Banks do check an individual’s bank balance and income level apart from the credit score to determine whether the person has the capacity to repay the loan. Hence winning a lottery may increase your ability to seek loan approvals.
Here is how you can use the money to improve CIBIL score
Though winning a lottery does not have a direct impact on your CIBIL rating, it does give you an opportunity to raise your score by other means. Here is what you can do with the money to improve CIBIL score.
- Pay back outstanding dues
If you were unable to clear your outstanding dues in the past because of lack of funds, you would surely have a bad credit history. Late payments, collections, charge offs and other such negative remarks brings down one’s CIBIL rating. Now is the time to put your money to good use. Contact the bank and discuss that you have sufficient money to repay them. Request them to remove your name from the bank’s loan defaulter’s list. Negotiate with them if they can remove negative remarks from the credit report if you clear all past debts.
- Reduce credit utilization ratio
Credit utilization ratio plays an important role in CIBIL score calculation. A high utilization shows an over dependence on credit and reduces your credit score. By using the funds to pay off your credit card outstanding balances you can reduce this utilization ratio and work towards improving your credit score. Make sure you do not use more than 30% of your available credit limit. Keeping low utilization levels helps boost CIBIL rating.
- Exhibit good credit behaviour
Since you have sufficient money in your bank account, make sure you pay all your bills and EMIs on time. By exhibiting responsible behaviour and making on time payments one can build positive credit history.