There is not denying the fact that it is hard to improve your credit score (or CIBIL score) when someone is unemployed, but it’s not impossible.
For example, 31-year-old Ashish Mishra, a trained architect, lost his job during the pandemic for a few months. He was worried about his poor credit score. But then he learnt that his worry was unfounded. All he needed to do was to follow a few steps to maintain a sound credit score. We summarise them here.
Strategies to improve credit score when unemployed
Review credit report: Obtain a free copy of your credit report from each of the major credit bureaus (Experian, Equifax, and TransUnion) and review it carefully for any errors or discrepancies.
Dispute errors: If you find any errors on your credit report, such as incorrect late payments or accounts that don’t belong to you, dispute them with the credit bureaus to have them corrected. This can potentially improve your credit score.
Timely payments: If you have existing debts, such as credit card bills or loans, make sure to continue making timely payments. Payment history is a significant factor in determining your credit score, so keeping up with payments, even if you’re unemployed, is crucial.
Reduce credit card balances: Aim to pay down credit card balances as much as possible. High credit card balances relative to your credit limits can negatively impact your credit score. Keeping balances low or paying them off entirely can help improve your score.
Avoid opening new accounts: While it may be tempting to open new credit accounts, especially if you’re facing financial difficulties, refrain from doing so if possible. Opening new accounts can lower the average age of your credit accounts and result in a temporary dip in your credit score.
Build positive credit history: If you don’t already have them, consider alternative credit-building options such as secured credit cards or becoming an authorised user on someone else’s credit card account. Responsible use of credit can help establish or rebuild your credit history over time.
ALSO READ: A high CIBIL score offers 7 key advantages to borrowers
Monitor your score: You should regularly monitor your credit score and credit report to track your progress and ensure that there are no new issues or errors affecting your credit.
Remember that improving your credit score takes time and patience, especially if you’re facing financial challenges like unemployment.
Frequently Asked Questions:
How can you ask for raising the credit limit?
You may contact your credit card issuer and request a credit limit increase. Many issuers allow you to request increases online or through their mobile apps.
What are the tried and tested ways to raise your credit score?
You can improve your credit score by regularly paying bills and keeping credit card balances low, and avoiding opening too many new accounts.
What is the alternative when your credit card issuer refuses to raise your credit limit?
If your current card issuer is not willing to raise your credit limit, you may consider applying for a new credit card with a higher limit
Does your income impact the credit score?
Unlike the widely-held perception, your income is not directly proportional to your credit score.
Would checking the credit score often lead to decline in the score?
Although it is believed that when you check your own credit score, it hurts your score but it is not true since checking amounts to a ‘soft inquiry’ which does not affect the score.
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Published: 22 Mar 2024, 05:12 PM IST