If you are not able to pay your credit card bill completely due to a particular financial constraints, then it can be a relief for you immediately. But this can leave a permanent mark on your CIBIL score. This means that the credit card settlement in your financial history indicates to banks that you were not able to pay the entire amount. This can affect your ability to obtain loans or credit at future competitive rates. However, despite this you can improve your CIBIL score.
Understand your account status
After the credit card settlement, first get a copy of your credit report from CIBIL. Look at the section giving details of your credit card account. The status should now be seen as ‘settlement’ as you have not paid the entire amount. It is different from ‘closed’ (full payment) and ‘Right of’ (no payment after 180 days).
Steps to improve your cibil score
Review your credit report
Start by receiving a copy of your credit report from CIBIL. Review it for any involvement or old information. If you get errors, oppose them immediately. This can help you improve your CIBIL score after credit card settlement by removing any wrong data that negatively affects your score.
Pay the outstanding loan
According to Axis Bank, if possible, pay other existing loans. This reflects financial responsibility towards banks and can gradually improve your credit score.
Maintain less credit use
Keep a target to use your credit limit less than 30 percent on any card. Low credit use ratio is seen favorablely and it can affect your score in a positive way.
Ensure timely payment
Make sure that you pay all your bills on time. Late payment can badly affect your credit score. Set up reminders or automatic payment can help manage it effectively.
Reduce credit inquiry
Every time you apply for credit, credit inquiry is started. By making too much inquiries in a short time, your score can be reduced. Apply for a new credit card only when it is very important.
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