Mistakes That can Negatively Impact Your CIBIL Score

As you already know, your credit score is a three-digit number ranging from 300 to 900. It represents your creditworthiness with a higher number being better. When you apply for a loan or a credit card, the lending institution always uses your credit score to determine your eligibility for the loan/credit card.

While there are four credit bureaus in India, most lenders trust TransUnion CIBIL for evaluating the creditworthiness of a prospective borrower. Since your CIBIL score is calculated based on your past financial record, it is crucial to be aware of the factors that impact your CIBIL score. In this article, we will discuss five mistakes that you must avoid to maintain a healthy CIBIL score.

5 Mistakes That Can Negatively Impact Your CIBIL Score

• Not Repaying Your Credit Obligations on Time

• High Credit Utilisation Ratio

• Frequently Applying for Loans/Credit Cards

• Not Having a Good Credit Mix

• Not Checking Your CIBIL Report Regularly

1. Not Repaying Your Credit Obligations on Time

Financial punctuality is the most important factor that affects your CIBIL score. For a healthy credit profile, you must ensure timely payment of your loan EMIs and credit card bills. Non-payment or missed payments indicate either poor financial health or negligence on your part, thus, negatively affecting your CIBIL score.

2. High Credit Utilisation Ratio

All credit cards come with a credit limit which is decided by the card issuer. If you exhaust your entire credit limit every month, it shows that you are completely dependent on debt. Ideally, you should not spend beyond 30% of your credit limit. For example, if the credit limit of your credit card is ₹1 Lakh, you should not be spending more than ₹30,000 on the card.

3. Frequently Applying for Loans/Credit Cards

Applying too frequently for loans or credit cards indicates that you are credit-hungry and are desperately looking for financial support. Every time a lender requests your credit score/report from CIBIL, your CIBIL score can be impacted negatively. Multiple such credit inquiries from lenders, known as hard inquiries, are sure to hit your CIBIL score hard. Hence, you must avoid frequent loan/credit card applications. If your loan or credit card application is rejected by a lender, it is advisable to wait for at least three to six months before you reapply.

4. Not Having a Good Credit Mix

Having a healthy mix of both secured and unsecured loans in your credit report shows that you can manage both types of debts. Therefore, for a healthy CIBIL score, you should have both secured and unsecured loans in your credit profile.

5. Not Checking Your CIBIL Report Regularly

Sometimes lenders report incorrect information to CIBIL or there might be an inadvertent mistake in your CIBIL report. Therefore, it is a good idea to check your CIBIL report regularly and keep tabs on your active and closed loan accounts. In case you notice a mistake or discrepancy, you must report the same to CIBIL immediately.

You can check your CIBIL score and get your Credit Health Report on Bajaj Markets. The Credit Health Report provided by Bajaj Markets in association with CIBIL is easily understandable even if you are not well-versed with the technicalities. Plus, you get insights into how you can improve your credit score. Check your CIBIL score, now!