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You’ve always been cautious about your financial health, balancing responsibilities and goals while managing debt
As your debt rose, you became more careful and started to save every month to clear your debts.
Life doesn’t go as planned, right?
When life threw an unexpected curveball with your friend’s accident, you did what any good friend would do—helped, even if it meant tapping into your savings, which was meant for debt clearing.
Since you do not have an emergency fund, you decided to solve the emergency as soon as possible by using the money you saved for the time.
Meanwhile, your loan is due, and you do not have much money to close immediately. So, you settled the account with partial repayment at the negotiated amount, thinking that your CIBIL score would not be affected because you were paying partially without any late fee.
After a few days, you were low on cash and considered taking a personal loan for the time being. So you check your Cibil score. Your eyes widened, and your jaw dropped.
Your CIBIL score has dropped to 694, a significant decline from 743.
Now, you’re left confused, wondering what went wrong. After reviewing all your transactions for missed payments, you find that everything appears to be in order.
Like you, several loan borrowers also do partial settlement, hoping their CIBIL score will remain the same or improve.
However, this partial settlement is never good for your credit health because it will show lenders that you were not able to close the entire loan, which will have a negative impact.
Now you might be wondering, What would be the solution to improve the CIBIL score after loan settlement?
Well, we are here to briefly explain how your CIBIL score is affected and what you can do to improve it over time. Before that, let’s understand what a CIBIL score is and how it affects your financial health.
The CIBIL score is the credit score that determines whether you are worthy of obtaining credits. It ranges from 300 to 900.
The CIBIL score is recorded and reviewed by Credit Information Bureau India Limited, which is the credit rating agency that determines the credit score by evaluating both secured and unsecured loans.
CIBIL score is evaluated based on your credit history. It is updated every month based on your credit activity.
The financial institutions and other banks evaluate your CIBIL report when you apply for a bank loan or a personal loan. A better CIBIL report has a higher chance of loan approvals at a better interest rate.
The higher your score remains, the more likely you will be able to increase your loan limits and improve the approval process. This credit value is solely based on your credit history.
Here is a detailed overview of how much your credit score determines your creditworthiness.
| Credit score | Credit-worthiness | Loan Approval Chance |
|---|---|---|
| Above 790 | Excellent | Very High |
| 771-790 | Good | High |
| 731-770 | Fair | Moderate |
| 681-730 | Average | Low |
| Below 681 | Poor | Less likely |
In general, improving the CIBIL score is a process of disciplined financial management with a strategic approach.
After a loan settlement, the CIBIL score is bound to decrease due to the failure of closing the account. This could impact your credit health in the future if it doesn’t improve.
Moreover, a small financial misstep—such as missing a payment, defaulting on a loan, or maxing out your credit card—can negatively impact your credit score, making future borrowing even more difficult.
Your credit score highly influences the loan approval time, interest rates, and other factors. As a result, a good score ensures faster processing times and allows you to access higher credit limits with low interest rates, giving you more financial flexibility.
Improving the credit score and maintaining the CIBIL report at the higher levels are two different things. Ultimately, achieving these two things is critical to becoming creditworthy. Improving and maintaining CIBIL scores relies on how much you repay as well as your credit activity after repaying the settlements.
Here are some steps that you can follow to improve and maintain your CIBIL score after loan settlement.
Close your loans instead of settling them to improve your CIBIL score. A settled account shows that you only repaid a portion of the amount due to financial difficulties, which shows up as a negative thing in the CIBIL report because you were unable to repay the debt in full.
This shows the future ledgers that you are not able to repay the entire debt. Banks and financial institutions may hesitate to approve new loan applications because of this. Even if the new loans are approved, they will most likely have high interest rates.
However, on the other hand, a closed account shows that you are a responsible borrower as you fulfil loan obligations. It also helps to increase the chances of getting future loans with better interest rates.
Your CIBIL score is severely affected when you delay in making payments. One late payment can reduce your creditworthiness from good to average.
Ensure your bills are paid on time and avoid any penalty. Even the slightest misconduct will be recorded in your CIBIL report, which can affect your credit status in the future.
Regular and timely payments, irrespective of loans and credits, will help to improve your credit score. Paying bills on time is another excellent way to achieve debt relief. Whether it is a small credit bill, an EMI, or a loan, make sure that it is paid on time to avoid defaults.
A credit card or a personal loan wallet always has a maximum limit that you can use up to. Exhausting this limit can drastically affect the CIBIL score. Credit utilisation is a critical factor lenders check up on. As a result, the CIBIL report mentions your credit utilisation ratio.
Always maintain a credit utilisation ratio between 30% and 40%. However, if you want to improve your credit score, keep your credit utilisation ratio under 30%. When your report shows a lower debt-to-income ratio, you will receive a higher score.
Even though chances for new loans are slim with a low credit score, you can get a credit card. If you do not have a credit card with you, then you can get one by applying for a secured credit card to manage your expenses.
Unlike other credit cards, a secured credit card is offered irrespective of your credit score. However, you need to have a fixed deposit because secured credit cards are issued against fixed deposits. Select a credit card with a favourable limit. Be mindful not to max out your credit limit, as it may impact negatively on your credit report.
Once you claim a secured card, remember that you need to pay off the entire amount before the due date. Regular and timely payments will help you improve your credit score gradually.
Having multiple loans is a setback for the CIBIL score. It shows that the borrower is in the web of a never-ending borrowing cycle. Lenders may become disinterested in providing loans due to your inability to close multiple accounts.
If you have too many loan applications, then try the debt consolidation method. It involves combining all loans into one new loan with a lower interest rate. This activity will help to close several other loans, which can improve your CIBIL score.
Furthermore, it allows you to easily track and pay your loans from a single location.
Do you know that the type of credit and loans you take also impact your credit scores? Yes, you heard it right. There are two types of loans: secured and unsecured loans.
Secured loans are loans that are secured by an asset. Auto and home loans are secured loans. Unsecured loans, on the other hand, have no collateral. Personal and education loans, for example, are unsecured because they do not have any collateral. Unsecured loans are approved after analysing the CIBIL report.
A balance of secured and unsecured loans is good for a strong credit profile. Because having too many unsecured loans can negatively affect your credit score. Also, having a high number of debts on one secured loan also causes your credit score to decrease.
When you settle or close a loan payment, you should not immediately apply for a new loan right after the settlement.
Applying for new loans right away indicates that you are desperate for more money. Furthermore, rejections from multiple loan applications increase the risk of a low CIBIL score.
Lenders reviewing your credit report may feel disinterested in providing new loans, as they will see you as a high-risk borrower, leading to loan rejections or higher interest rates on approved loans.
Every new loan application results in a hard inquiry. Too many requests for new loans will indicate that you are in financial distress, increasing the likelihood of loan rejection.
An NOC is a No-Objection Certificate, a document that confirms a loan amount has been fully repaid. This document is created to prevent any legal dispute between the lender and borrower in the future.
NOC certificates are also recorded in the CIBIL report. A properly closed account receives an NOC, which can positively improve credit score. NOC indicates that the loan is fully repaired, resulting in greater trust from lenders and increasing the chances of loans getting approved in the future.
When the CIBIL score is lower, borrowing becomes difficult as lenders lose their trust. The chances of low-interest loans are very low. However, you may get approved for unsecured loans with high interest.
You may believe that high-interest loans are advantageous to you given your financial situation. Let us remind you that high-interest loans can deplete your income significantly. So make sure you get the right kind of loans to improve your financial condition.
Your credit score impacts your loan and credit approvals in numerous ways. Your CIBIL report is thoroughly examined by the relevant financial institution when you apply for bank loans and personal loans.
A good CIBIL score estimates guaranteed loan approvals with the best interest rates. However, a poor CIBIL score can impact loan approvals in numerous ways.
Here is what will happen if you have a low CIBIL score:
No, you cannot improve your CIBIL score immediately if you have attempted late fines and other defaults. Improving the CIBIL score is a long process of making informed financial decisions regarding credit and debt.
Your CIBIL score can be gradually improved based on your credit activity. You can improve your CIBIL score by practicing the above-mentioned methods regularly. A consistent and disciplined plan may help you improve your CIBIL score effectively.
There is no quick fix to improving your CIBIL score, as it is updated monthly based on your financial activity. To establish creditworthiness in the eyes of lenders, you must consistently make timely payments over an extended period.
Building and maintaining a strong credit score requires financial discipline, responsible credit usage, and regular monitoring of your credit report. Use a mix of right loans that have a low interest rate and a better limit.
Improving your CIBIL score after settling a loan can be difficult, as it records that you failed to close your pending loan. Loan settlement has a negative effect on your credit history even if you settle your loan at the right time.
Once your CIBIL score becomes low, it won’t come back up as quickly as you want. It requires disciplined financial habits and consistent effort to maintain and improve the CIBIL score. A low CIBIL score can harm your credit report, leading to rejections from new loans and approval of only high-interest loans. This can further harm your financial condition. So it is crucial to practice disciplined financial habits to improve your CIBIL score.
Start with closing your accounts as soon as possible instead of settling. Then regularly pay the bills before they are due, and also utilise your credit ratio efficiently to prevent maxing out. When you close your loans, do not immediately apply for new loans, as it will show you are hungry for more cash.
Following a structured plan for improving your credit health will allow you to gradually transform your credit report. Remember, it’s a gradual process, and with patience and responsible financial behaviour, you can reclaim your creditworthiness and improve your chances of securing loans in the future.
Disclaimer: The information provided in this blog is for educational and informational purposes only and should not be considered as financial or investment advice. Stock market investments are subject to market risks, and past performance is not indicative of future results. Readers are encouraged to do their own research and consult with a licensed financial advisor before making any investment decisions. The author and publisher are not liable for any financial losses or damages incurred from following the information provided in this blog.
Hashim Manikfan
Hashim Manikfan is a professional financial content writer with extensive experience in creating engaging and informative articles on a wide range of financial topics. With academic background in Communication and Journalism, Hashim has published numerous articles aimed at educating readers on essential financial principles. His work covers areas such as financial markets, investment strategies, economic trends, and more. His writing style ensures complex topics are accessible and interesting, making financial literacy attainable for a broad audience.
Ever since you have learnt about the stock market, you have heard people either lose their money or generate profit.
When you hear about investors and traders profiting from stocks, doesn’t your mind desire to profit from the stock market?
It does, but your fear prevents you, doesn’t it?
Does it make you wonder if you have what it takes to make a profit on the stock market?
If it does, you are not alone. Like you, many people are skeptical about many things, such as whether the price of a stock will fall after they purchase it or whether they should wait longer for the price to fall.
Random thoughts like these can make you doubt yourself.
Let me tell you, the sooner you get past these obstacles, the clearer your mind will be.
What if we told you that the best way to overcome self-doubting thoughts is to start exploring the stock market by investing a small amount?
Making a small profit from the stock market is so simple that anyone can make a profit. From Warren Buffett to your next-door neighbour, everyone is profiting from the stock market.
All you need is a basic understanding and discipline to make a generous profit in the stock market.
Earning money in the stock market begins with planning and putting your skills into action. There are numerous ways that you can make a profit in the stock market.
We will start by explaining the most basic method for profiting in the stock market, and then we will go over other ways to turn your investment into substantial profits.
Making money in the stock market starts with fostering disciplined habits that control your emotions from making impulsive decisions. Becoming successful in the stock market comes with achieving small things.
Instead of eyeing the bigger price, you should start small and gradually turn your small investments into one big, substantial profit.
When you plan to enter the stock market, the first thing you need to do is study the stock market. Understanding the landscape and mechanism of the stock market is crucial for generating profits.
Once you understand the stock market basics, you can use this simplest method to make a profit.
Buy, hold and sell is the simplest way to make a profit in the stock market
Identify a stock that has potential growth. Purchase the stock at the current price and hold it until the price of the share rises. In the long run, the price of the stock can outperform market fluctuations.
Therefore, simply purchasing a stock of your choice at a lower price and selling it at a higher price can earn you a significant amount of profit, especially if you hold it for the long term.
Historical reports of the stock market indicate that this way of investing is highly rewarding in the long term.
The trickiest part is identifying when the stock price is at its lowest and highest levels.
Like any other trick, the secret to identifying the stocks with potential is to analyse the fundamentals of the business, review financial performance, and look for new developments.
Making profits in the stock market involves a combination of fundamental proficiency, technical skills, and emotional discipline.
Gaining knowledge of the stock market’s foundations will help you understand the asset’s performance and potential. Technical analysis will help you identify the right entry and exit points. Then your emotional skills will determine whether you can make informed decisions or not.
This method is a long-term strategy that may take days or months to generate a profit. So if you are looking for consistent profit every day from the stock market, this method may not be suitable for you.
However, if you are looking to earn consistent profit from the stock market, then you should keep reading to find out what is in store for you.
The stock market can be highly rewarding when you make informed decisions. Since the buy-and-hold method may not yield potential profits in the short term, there are other means to generate profits in short intervals.
In addition, other types of long-term investments can yield more profits than the simple buy-and-hold method.
Stock market investment is driven by financial goals, which are categorised into short-term, mid-term, and long-term investments. So the nature of achieving these goals varies.
Careful planning of your financial goals and assessing your financial situation can help you earn money from the stock market.
The two popular activities in the stock market are investing (for long-term goals) and trading (for short-term goals). Both trading and investing in the stock market help you achieve financial freedom by making informed decisions while investing and trading.
Here are some of the strategies you can use to multiply your profits through investing and trading.
Investing is the process of purchasing shares, bonds, and other securities for the long term. The historical report of shares, ETFs, bonds, and other securities has shown significant growth in the long run.
So making long-term investments is an excellent way to achieve financial freedom. Meanwhile, investing for the long term can be tiring for some with the requirement of analysing the charts, the performance of the company and other factors. While for some this can be entertaining.
As a result, a variety of investment strategies are developed to meet individual needs. Here you will find different long-term investment strategies that can grow your wealth.
A mutual fund is a pool of securities such as equities, ETFs, debt funds, index funds, bonds, and others. Investing in a mutual fund involves buying a pool of securities from various asset classes. Mutual fund portfolios are managed by experts on behalf of the investors.
SIP investment is known as a Systematic Investment Plan, which is a systematic plan that allows investors to invest a predetermined amount at regular intervals.
Investing through SIP has the potential for the investment to grow through the power of compounding and take advantage of the rupee cost average in the long term. You can also automate your payments into SIP for regular contributions.
Unlike SIP, you do not need to invest regularly in a lump sum. Lumpsum investments in mutual funds are one-time investments that involve investing a substantial amount at a single time and allow the investment to grow over the long term.
Lumpsum investments yield better profits when you invest when the market is in a downtrend. This will give your investment immediate exposure to capture the market’s upward movement when it rises. However, lump-sum investments will cost you lower transaction fees.
Dividends are payments that businesses make to their shareholders on a quarterly, monthly, or annual basis. Reinvesting the dividends to purchase more shares can benefit from the power of compounding.
Investing in dividends can help you create wealth by providing you with consistent cash flow. Regular income from dividends can offset your losses. Dividend-paying indicates the business you have invested in has strong, predictable cash flows and a stable business model.
A diversification strategy is the process of spreading your investments across various classes of stocks, such as large-cap, mid-cap, and small-cap. Diversification is not limited to stocks.
Like mutual funds, you can personally choose to invest in various securities based on your financial situation and investment goals. Diversification is a great way to mitigate the losses during the fluctuations.
An initial public offering is when a company issues shares to the public for the first time to raise capital. When IPOs are issued, investors can buy them at the issue price before they are listed on exchanges. However, due to high demand, IPOs are frequently listed at a premium to the issue price, allowing you to profit from the listing.
Although, you can also hold on to shares of the invested company if it has strong fundamentals for potential growth in the future.
IPO subscriptions are available on various platforms, where you can apply and pay a premium price to book the slot. If you are qualified for the IPO, you will receive the shares on the proposed date. You can choose to hold or sell the shares on listing day.
Trading is slightly more complex than investing. While you can invest by conducting a fundamental analysis of a business, trading concentrates on a share’s technical features. It involves studying charts, technical indicators, candlestick patterns, chart patterns, and others to determine the right entry and exit points.
Although, all of these may sound complex, they are not impossible to learn. Before you begin your trading journey, you should understand the concepts behind trading. A comprehensive understanding of trading may help you make wise trading decisions.
Unlike investment, trading requires you to be more engaged with the charts and evaluate your best positions to take a trade. The best thing about trading is you can make quick profits within a day. Moreover, there are numerous profitable trading strategies.
Success in trading requires a disciplined approach, effective risk management, and a deep understanding of technical analysis and trading strategies.
These are some of the strategies you can incorporate into your trading plan as per your trading style and preferences.
Intraday trading is a trading strategy where a trader buys and sells securities within the same trading day, aiming to profit from short-term price fluctuations, which requires the use of specific techniques and analysis to identify entry and exit points within the selected time frame.
This method of trading is actively carried out throughout the day, aiming for short-term profit-booking with a target of “stop at 1% profit a day” or “three trades per day” set according to your trading strategy.
Intraday trading can significantly multiply profits, but it can also incur losses. Therefore, integrating risk management decisions such as risk-reward ratio, stop loss, and take profits is crucial to mitigating losses.
Swing trading is another trading strategy that focuses on capturing the potential of short-term trends. In this trading strategy, traders usually buy a share from the share market before the trend begins, hold it for a few days or weeks as the price rises, and then sell it when they make a profit.
This strategy is excellent for generating profit from short-term fluctuations. Traders can use trend-analysing indicators like Bollinger bands, RSI, moving averages, and others to predict price movements.
Option trading is different from any other form of trading strategy. Because option trading is not performed in direct stocks like other trading methods. Instead, orders are placed on derivatives of stocks and others as a contract to purchase or sell when the stock rises or sell when the price falls at the predetermined time.
Option trading involves a trader signing a contract with the seller in exchange for a premium, with the obligation to buy or sell the stock at a predetermined time, depending on the nature of the option contract selected.
Option trading is carried out in various derivatives, including NIFTY, Sensex, and other derivatives. Given the nature of the approach, option trading has a high risk-reward potential. You must be cautious and implement risk management decisions when doing option trading.
Intraday scalping is a more intense trading strategy than regular intraday trading. This trading strategy involves placing and executing multiple trades in a smaller time frame to capture the profits from minute price fluctuations.
This trading strategy allows for quick profits while limiting market exposure. This trading strategy requires a thorough understanding of technical indicators to execute trades successfully with timely entry and exit positions.
On the other hand, tight risk management is essential to controlling losses on each trade to maintain disciplined trading.
Algo trading, also known as algorithmic trading, is a revolutionary trading strategy that minimises the human touch to regulate trading data.
In this trading strategy, traders have to develop an algorithmic formula by inputting commands based on their trading style. When the conditions are met, it automatically executes the trades without any human assistance. Traders can also test their algorithm on previous trading data for efficiency.
This trading strategy has transformed the entire trading landscape by eliminating emotional conflicts in trading decisions. It also executes trades instantly, reducing slippage as well as optimising transaction costs.
You can easily earn ₹1,000 in the stock market by investing as well as trading. In trading, you may need a bigger capital to earn ₹1,000 quickly. Whereas, you can invest as little as ₹100 and wait for the price to rise to earn₹1,000.
Yes, you can invest as low as ₹10 in the stock market by choosing small-cap stocks. Open a demat account and find stocks that are below ₹10. Invest in stocks with growth potential to reap the rewards.
The 7% rule states that you should sell stocks if their price falls below 7% of the price at which you bought them. This way, it helps to cut losses before it is too late. Following this is crucial, as our emotions may conflict, resulting in holding onto the stocks for too long.
Investing and trading are the two different methods to get profit in the stock market. Both of these trading measures require a disciplined approach, knowledge, patience, and risk management strategies.
While investing aims to achieve long-term goals by profiting from stock growth over time, trading aims to make short-term profits by capitalising on market fluctuations. You can either choose to invest or trade based on your financial situation and goals.
Investing is more risk-free than trading because it exposes you to fewer market fluctuations over time. Meanwhile, trading is riskier and has greater potential for rewards from a single trade.
Whether you are trading or investing, you can become wealthy in the stock market by adopting a disciplined approach and putting key risk management techniques into practice.
So before you start, understand the market principles and develop a solid trading plan and style to begin your journey in the stock market.
Disclaimer: The information provided in this blog is for educational and informational purposes only and should not be considered as financial or investment advice. Stock market investments are subject to market risks, and past performance is not indicative of future results. Readers are encouraged to do their own research and consult with a licensed financial advisor before making any investment decisions. The author and publisher are not liable for any financial losses or damages incurred from following the information provided in this blog.
Hashim Manikfan
Hashim Manikfan is a professional financial content writer with extensive experience in creating engaging and informative articles on a wide range of financial topics. With academic background in Communication and Journalism, Hashim has published numerous articles aimed at educating readers on essential financial principles. His work covers areas such as financial markets, investment strategies, economic trends, and more. His writing style ensures complex topics are accessible and interesting, making financial literacy attainable for a broad audience.
