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Building A Healthy Credit Profile and A Good CIBIL Score

By Finserv MARKETS - Feb 27,2020
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Building A Healthy Credit Profile and a good CIBIL Score

A healthy credit profile and a good CIBIL score go hand in hand. A CIBIL score is a number that is used to assess one’s credit-worthiness. You are assigned a score between 300-900, depending upon several factors including details mentioned in the CIBIL report, and credit history. All the information is stored by TransUnion CIBIL, a credit information company. A CIBIL score of 700 and above is considered to be ideal, while a score between 550-599 is considered average.

Despite the exceeding importance of having a healthy CIBIL score, several fail to maintain one and, as a result, get credit refusals. Following is a breakup of the rejections of loans based on age category. As is evidenced from the graph, the leading age group for denial of loans are millennials for a variety of reasons, from mortgage payments to car loans.

Building A Healthy Credit Profile and a good CIBIL Score

Source: CNBC

The importance of a healthy credit profile and good credit score cannot be overstated. Those without a healthy credit profile have lower chances of having their loan application accepted. Those who do have their application accepted would likely be subject to higher rates of interest or collateral requirements.

Now that we know the importance of maintaining a healthy CIBIL score, we can move on to assess the various ways in which a healthy score can be maintained. They are as follows:

Make a Credit Footprint

When you apply for credit of any kind, the most important thing that the lender needs to know is whether you will be able to repay the amount in the stipulated time frame. For the same, it is important for them to have proof of the fact that you have taken credit in the past and repaid it successfully without defaulting.

In order to create a credit footprint, all you have to do is take credit for a smaller amount. For instance, a purchase of a mobile phone, or a laptop, on EMI. Once you repay it in the given time frame, it creates credit history that you can then show to lenders in bigger transactions. Giving them proof of your commitment to pay off the EMI is a crucial aspect of availing any sort of credit.

Credit card application from the same bank that you have an account with

The idea is to develop a relationship with your preferred financial institution for all your future requirements. If you have a credit card or EMI Card from your bank or NBFC, opt for a loan at the same institution. The better they know you and your finances, the more likely it is for them to give you credit when you require it.

Responsible Credit Access

Once you begin earning a salary, you will likely begin getting credit card offers with several cash-back offers and higher credit limits. It may be tempting to take such offers, but you must remember that the more credit cards you amass, the greater your likelihood of eventually falling into a debt trap. In fact, you don’t really need more than one credit card. What is more important is to manage a single credit card properly and stay within the credit limits in order to create favorable credit history.

Timely Payments

Two dates are important to note when availing credit – your billing date, and your due date. Credit health can be impacted by even one failed payment; this, in turn, damages your CIBIL score for the next 2 years. CIBIL score is based on the previous 24-months of credit history. Failing to pay today has a detrimental impact on the score and ability to access credit in the future.

Further, it is important to check your CIBIL score and to report it in a timely manner. Since your previous credit history is monitored through the CIBIL score, any time is a good time to measure it and ensure that you have a healthy score to report at all times.

Check CIBIL Score

Knowing Credit Limits

Never let your card max out- that’s a golden rule. If you know your credit limit, you can ensure that you stay below the maximum utilization limits. In fact, it is wise to not go over your card utilization limit (over 50%), unless there is an emergency. This way, you can maintain a healthy CIBIL score.

Maintain a healthy mix of credit

There are two types of credit you can opt for – secured and unsecured. Opting for secured credit would require that you pledge an asset of some kind. Unsecured credit doesn’t require the pledging of an asset. It is recommended that you maintain a healthy balance between your secured and unsecured loans and ensure that your credit profile isn’t skewed toward either.

These are all the things you must keep in mind in order to maintain a healthy CIBIL score. And once you do, a whole range of credit opportunities are open to you to explore!

On Finserv MARKETS, checking your CIBIL score is exceedingly simple. With the free Financial Health Check Report on Finserv MARKETS, in addition to your CIBIL score, you also get a detailed picture of your credit profile. The report is tailor-made according to your financial health and provides valuable insights to help you improve your profile. Moreover, it is easy to interpret and will help you make informed financial decisions in the future. The first step to building a healthy credit profile starts with the Financial Health Check Report on Finserv MARKETS.

Also read how much time to improve CIBIL Score

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522