The CIBIL score plays an important role in your financial life. To put it bluntly, any form of secured or unsecured credit would only be available to you if you have a good CIBIL score. The CIBIL score’s impact can be greatly felt when applying for a credit card, home loan, business loan, personal loan, or any other form of credit.
Without a doubt, the implications of the credit score are far felt on your financial health. Hence, maintaining an excellent score is important here. Let’s understand what a good CIBIL score entails.
The CIBIL score is a simple numerical representation of your credit health, i.e. your creditworthiness and ability to repay credit. It is greatly impacted by your payment history and credit duration, among other things. TransUnion CIBIL is one credit bureau whose credit scores are widely regarded among lenders. The CIBIL score comprises a 3-digit number ranging from 300 to 900. A score in the higher range will help you secure the best credit deals. Generally, a CIBIL score of 750 or above is considered good.
Now, let’s dive deeper and look at the mistakes that can impact your CIBIL score negatively.
The most important things that credit bureaus consider while evaluating your credit report are:
The way you repay your credit has the most notable influence on your CIBIL score. As per a CIBIL analysis, defaulting on your payments by 30 days could reduce your score by a significant 100 points. Hence, avoid irresponsible repayment behaviour and ensure that you always make your EMI and credit card bill payments on time.
Keep a constant eye on your credit utilisation ratio. It is the share of credit that you are actively using in proportion to your available credit limit. Experts suggest that it is best not to exceed beyond 30% of the available credit limit. A higher credit utilisation ratio can paint you as a credit-hungry borrower.
When you apply for credit with a lender, they undertake a hard enquiry by pulling up your credit report. If you make multiple credit applications, the same reflects on your report. A lot of hard inquiries adversely affect your credit score. Each time you apply, there is a drop in your CIBIL score. In this case too, lenders would consider you to be a credit-hungry individual and refuse to offer credit. Hence, it is advised that you take some time in between applying for new credit offerings.
The CIBIL score comprises a detailed record of your credit health. Very often, this report can have errors. Errors recorded in your report will impact your score. This makes it important to regularly check your credit report and convey discrepancies, if any. Remember, the error is likely to have been a mistake on the lender’s part, hence, bring it to their notice immediately.
You may get used to opting for just one kind of credit. However, it’s recommended to maintain a healthy mix of secured and unsecured loans in your credit portfolio as the opposite would have a negative impact on the credit score.
The credit history essentially implies the number of years that have passed since you first applied for credit. Having a significant credit history that dates back in time helps lenders make an informed decision before sanctioning a loan or offering a credit card. Hence, you must focus on building a good credit history over time.
As you progress down your financial path, you may neglect or choose to close old credit cards. When you close old accounts, you end up losing all the credit history associated with it. If you have a card that you have used for a few years, it is best not to close it. Experts advise that it is wiser to close newer cards if you must.
Now that you know the factors that can impact the CIBIL score, you should make an effort to maintain your best financial behaviour. Experts recommend that you check your CIBIL score from time to time. Check your CIBIL score on Finserv MARKETS to conveniently obtain the details of your financial health. Note that keeping a tab on your credit score is just as important as having healthy credit behaviour. Meanwhile, also check out the different loan offerings on Finserv MARKETS, such as home loan, personal loan, business loan, and more to fulfill all your financial needs. Apply today!