Rebuilding your Credit Score after a Default: A Doable Guide to Taking back Control

Rebuilding your Credit Score after a Default: A Doable Guide to Taking back Control

Jun 4, 2024

Let’s get the basics out of the way first, experiencing a default on your loan or credit card payment is not the end of the world. A little bit of financial discipline and patience goes a long way in rebuilding your credit score. 

We are jumping right into the tips now…

Crackdown on Credit Report

Start by examining your credit report from one of India’s credit bureaus, such as CIBIL, Experian, or Equifax. Review it carefully to understand how much the default affected your credit score.

Weigh your options

Reach out to your lenders to discuss the default. Many financial institutions are willing to negotiate repayment plans or settlements. You will be surprised by how quickly  clearing outstanding dues impact your credit score positively!

Build a Solid Plan

Formulate a budget and a repayment plan that prioritizes clearing any outstanding debts first. It always helps with confidence when you start by clearing your smallest debt first. Don’t forget to focus on timely payments, as consistency is key to rebuilding your credit score.

Be wise with the swiping and borrowing

Avoid applying for new credit or using your credit card immediately after a default. When you do, maintain your credit utilization ratio below 30%. This means if your credit limit is ₹1,00,000, try to use no more than ₹30,000 at any given time. High credit utilization can negatively impact your score.

Be on time, everytime

This one is a non-negotiable, and a constant. It doesn’t help to just pay all your loan and credit card bills on time once. What matters is doing it every time. Ensure all your bills, including utility and phone bills, are paid on time. While these may not directly impact your credit score, they demonstrate financial discipline and can prevent further financial strain.

Track your Progress

Regularly check your credit score and  credit report to monitor your progress. You can download and explore apps like Olyv which helps you track your credit score for free while also offering tips to improve your score! 

Get Professional Help 

If you find it challenging to manage your finances, consider seeking help from a financial advisor or credit counseling service. They can provide personalized advice and strategies to improve your credit score.

Before we leave you with the tasks…

We know that rebuilding your credit score after a default takes time and dedication. But, here's the thing. If you are able to adhere to even most of the tips above, you can definitely restore your financial health and ensure access to better credit opportunities.