The CIBIL score, a 3-digit number, is an imperative part of your financial journey. It is a numerical value that lenders widely use to assess your financial wellbeing. Whenever you apply for a credit offering, lenders consider the score to determine your eligibility. The CIBIL score indicates your overall creditworthiness. Hence, it is crucial for you to stay updated on your credit health and build a good CIBIL score.
The growing importance of the CIBIL score has also led to it being surrounded by several unanswered queries and myths. The lack of understanding on the subject could prove fatal to your credit health. One of the most widely floating questions among individuals is, ”‘Does checking the CIBIL score often affect it negatively?” Well, no! Read on to know more about the CIBIL score and factors that negatively affect this number.
The CIBIL score is a numerical representation that helps lenders determine your financial history. It comprises 3 digits falling between the range of 300 and 900. Having a score that leans towards the higher end, i.e. 900, will essentially fetch you the best deals on loans and credit card offerings.
It is a common belief that checking the CIBIL score or credit report often can hurt your CIBIL report. However, this is a wrong notion. You can check your CIBIL score as many times as you wish. This is because the inquiry made by you is recorded as a soft inquiry, unlike those made by lenders when you apply for a loan. Soft inquiries have no impact on your CIBIL score.
On the other hand, hard inquiries, i.e. those initiated by lenders, have a significant impact on your CIBIL score. They are undertaken to evaluate your creditworthiness and ability to repay a loan. Each time you apply for a loan, the lender will pull out your report and the same will be recorded. Multiple such inquiries made over a short span of time can paint you to be a credit-hungry borrower and reduce your chances of success.
It is advised that you check your CIBIL score (soft inquiry) once every 3 to 6 months, depending upon your preference.
The CIBIL score is negatively impacted due to several reasons, namely:
The repayment history has the highest influence on your CIBIL score. Late payments or missed payments have a significantly negative impact on your report. Delinquency of 30 days in making a repayment can reduce your score by as much as 100 points. Thus, it is extremely important to make all your credit card bill payments and loan EMI repayments on time. Set up alerts to avoid delays and defaults.
The credit utilisation ratio is another important aspect that affects your CIBIL score. It is the amount of credit used in proportion to the credit that is available to you. It is best to keep your credit utilisation ratio limited to about 30% of your total credit availability. A higher credit exposure can make lenders wary of your repayment ability.
Unpaid or outstanding debt negatively reflects your credit report. Try and keep your unpaid dues to NIL, even when the amount is not as high.
Errors in the Credit Report: It is not uncommon for errors to occur in your credit report. However, these errors can have a serious impact on your report and score. Hence, you must regularly check your CIBIL score for discrepancies and get them rectified by the lender.
If you have been under the impression that checking your CIBIL score recurrently affects it negatively, then you can now rest assured knowing that it does not. Keeping an eye on your CIBIL score through regular checks is, in fact, healthy. It helps you mend your financial behaviour and maintain a good credit history. The credit bureaus are as much for your service as they are for the lenders. Thus, you can go ahead and check your credit score whenever you need to. As mentioned before, refrain from filing too many loan/credit applications in a short time as multiple such hard inquiries can affect the CIBIL score.
Use the Financial Health Check Report to access information on your credit health. Stay updated on your score to avail the best lending products on the market. Apply for a loan on Finserv MARKETS, today!