Applied for a loan and the bank rejected it? Don’t worry, this is very common! It happens to most people when their credit score is low. But the good news is that it’s possible to improve your credit score, and quickly too.
I’ve collected some simple tips that are easy to follow. Let’s look step by step at how you can improve your credit score after loan rejection, so that you can get a loan easily next time!
First, Understand What a Credit Score Is and Why It Was Low
A credit score is a number (from 300 to 900) that tells how trustworthy you are for borrowing money. In India, the CIBIL score is the most popular.
The main reason for loan rejection is a low score โ such as late payments, too many loans, or missing credit card bills. Now, to improve it, first check your score โ you can check it for free once a year on the CIBIL website.
Step 1: Pay Your Old Bills on Time
The most important thing โ pay all your EMIs or credit card bills on time! Late payments severely damage your score. If you missed one, pay it quickly and keep the next months regular. Making this a habit will improve your score quickly.
Step 2: Use Your Credit Card Smartly
If you have a credit card, don’t keep a balance of more than 30% of your limit. That means if your limit is โน1 lakh, don’t let it go above โน30,000. Pay the full bill every month, not just the minimum. And if you have multiple cards, use them all but a little bit each, so they appear active.
Step 3: Don’t Apply for Too Many New Loans or Cards
Every time you apply for a loan or card, an inquiry is made, which slightly lowers your score. Don’t send too many applications at once. Wait 6-12 months and only apply when necessary.
Step 4: Fix Old Mistakes
Check your credit report for errors โ such as incorrect payment information. If there are any, file a complaint with CIBIL, and they will fix it. Keep old closed loans on your report, as they show positive history.
Step 5: Get a Secured Credit Card or a Small Loan
If your score is very low, get a secured credit card (against an FD). Regular use and timely payments will improve your score. Or take a small personal loan and repay it on time โ this will build your credit history.
Step 6: Keep Credit Utilization Low and Maintain a Mix
Don’t just rely on credit cards; also have some loans (like a car loan), as a good credit mix results in a better score. But don’t overdo it โ use less than 30% of your total credit limit.
How Long Will It Take to Improve My Score?
If you follow these steps regularly, you will see a noticeable improvement in 3-6 months, and it can become very good in a year. Be patient and consistent!
| Step | What to Do |
|---|---|
| Bill Payments | Pay every bill on time |
| Credit Utilization | Keep it below 30% |
| New Applications | Minimize them |
| Check Report | Fix errors |
| Secured Card | Use it regularly |
| Credit Mix | Have both loans and cards |
Pros and Cons
Pros (Benefits of Following These Tips):
- Your score will improve quickly, and you’ll get your next loan easily.
- You’ll save money because you’ll get a lower interest rate with a high score.
- You’ll develop financial discipline.
- You can check your report for free.
Cons (Some Difficulties):
- It takes some time to see results.
- Getting new cards or loans might be difficult initially.
- You have to follow a strict budget.
Conclusion
There’s no need to panic after a loan rejection โ follow these tips, and your credit score will improve! The most important thing is consistency โ once you develop the habit, your financial life will be set. If you have any doubts, ask in the comments, and if you found this helpful, please share it. Guaranteed loan approval next time!
