CIBIL Score or Credit Score is an extremely significant numeral for an individual while dealing with banks and other lending entities. CIBIL is the Credit Information Bureau of India and performs the task of collating credit and loan related data for people. It then processes this data to come up with credit reports and subsequent credit scores for every customer.
Credit bureaus use multiple parameters to arrive at the final credit score of a customer. This information can be the number of credit channels owned by you, repayment history of credit card bills, credit utilization information and details about the number of secured and unsecured loans availed by you.
A CIBIL score, in short, is a measure of an individual’s creditworthiness. CIBIL scores lie in the range of 300-900. A score of 750 and above is generally considered good and is associated with a low risk of default. Hence, customers with a higher CIBIL score are more readily accepted as loan customers than those with a score less than 750.
Here are a few minor factors that if ignored or taken lightly can affect your credit score adversely.
Delayed credit card payments
Amidst our busy daily schedules, there are a lot of things that simply slip out of our minds; credit card bill payment is one such thing. One of the most prevalent reason for this is procrastination. The other reason is that most of the times, if you are a regular customer, banks tend to reverse the late payment fee. This in turn makes you feel relaxed and ignorant of the effect of late payment on your credit history. A single late payment can have a drastic effect on your credit score.
To make sure you do not suffer credit score dips because of late payment, schedule payments using phone and diary reminders. Also, if possible, add your credit card to an auto-biller list. This will ensure that your credit card bill is auto-debited each month at the scheduled date. For taking credit card bill payments seriously, learn and keep in mind how a single missed-out payment can badly affect your credit score making it difficult for you to obtain credit.
Not depositing enough cash in your loan account
There are times when people suffer a dent in their credit reports for delayed or non-payment of loan installments. Any car loan account or home loan account which is supposed to auto-debit your monthly loan installments, should have enough cash to ensure timely loan repayments. Any miss on that front may result in a lowered credit score.
Making too many loan enquiries
Trying to obtain credit can be a daunting task. Hence, customers are prone to make enquiries with a host of lenders in order to avail the most suitable loan product. While this may sound like a harmless thing to do, it can actually be a damper on your credit score. Making loan enquiries through every other lending company can severely affect your credit score. Too many hard enquiries can reflect badly in your credit report and signify that you are desperate for credit.
You can find out about various loan products online and can then visit the bank of your choice for enquiring about it.
Availing too many unsecured loans
Obtaining loans for various personal needs has become extremely common. These loans are availed for housing, education, vehicles as well as a host of other requirements. While this sounds like an extremely convenient and flexible financial arrangement, too many loans associated with your name can dampen your CIBIL score. This is especially true if you your loan mix contains more unsecured vis-a-vis secured loans.
Multiple unsecured loans lower your CIBIL score while credit options like home loans have a positive effect on CIBIL score. This is because home loans are used to fund assets and are thus considered financially fruitful.
Owning multiple credit cards
Maintaining multiple credit cards may be a status symbol and appear to act as a great source of funds. However, multiple credit cards do not reflect well on your credit score. Whether it be missed payments or balance transfers, your credit score is affected negatively in such instances. Keeping track of many cards is difficult and can strain your income unless managed meticulously.
Avoiding minor slipups is the key to maintaining a good credit score. The most important step in this regard is empowering oneself with the knowledge of pros and cons of credit and its subsequent impact on credit history.