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Credit scores are assigned by Credit Information Bureaus which maintain credit histories of people as provided by registered credit companies. Credit Information Bureau India Limited or CIBIL is the primary credit information company in India. It was founded in the year 2000 and since then has played a critical role in the financial scheme of the nation.
Credit score is a distinct number assigned to each individual based on an analysis of his/her credit report. Credit scores depict the creditworthiness of a person. A high credit score is indicative of a good credit history and hence, is preferred. A good credit score signifies that a person repays his credit on time and this in turn aids in availing loans faster and at lower rates.
Credit score for any individual can lie anywhere between 300-900. A score of more than 700 is generally considered good while anything below that is not preferred by banks. Data indicates that loan applications are generally green for customers with a score of 750 and above.
A bad credit score, can ruin your chances of acquiring credit at good rates and sometimes acquiring credit itself can become a tough nut to crack.
There are many factors that make or break your credit score. Some of them have been highlighted below.
A credit score is something that you just cannot ignore; especially if its bad. It is always good to look for ways to improve your credit score since this is essential for availing smoother and cheaper credit. Listed below are some of the most effective ways of improving your credit score.
Make timely payments on bills: Even if your credit score is bad currently, you need to be extra vigilant and prompt in paying off your credit card bills and other utility bills on time so that your credit report does not show any major defaults.
Make online payments keeping in mind the time your transaction might take. While paying by cheque, ensure that you drop the cheque a few days before the bill due date. This will ensure timely payment even in the face of infrastructural delays which cannot be controlled.
Abstain from too much credit: These days it is a common thing to receive calls and emails from various banks/financial institutions that offer free credit cards. Sometimes, we are of the view that owning multiple credit cards will make our life easier. Balance transfer and other card benefits are supposed to make our life financially flexible.
However, what many people do not understand is that owning too many credit cards shows we are hungry for more credit and as such lowers our chances of receiving additional credit when it is actually required.
Also, multiple credit cards make it difficult for a person to track payment due dates and as such enhance the chances of default and late payment.
Wise use of credit cards: Credit cards are a great financial tool to own. They provide us enough credit for all our necessities and let us avail exclusive benefits too, like reward points and air miles. Credit cards also enable us to roam cashless without worrying to stop at every other ATM.
However, all these benefits apply only if these cards are used wisely and optimally. Going beyond your credit limit every month is a bad move. Also, closing a credit card suddenly isn’t a good idea unless you obtain a NOC from your credit provider.
Avail a right mix of secured and unsecured loans: Unsecured loans like personal loans and car loans generally negatively impact the credit score of a person. Secured loans like home loans, on the other hand, are invested towards asset creation and impact your credit score positively. Hence, you should try to minimize the unsecured component of your credit portfolio so as to influence your credit score positively.
Check your credit report: In case you have a bad credit score, the first thing you should do is obtain a copy of your credit report by applying for it on the CIBIL website. This can then be analyzed to check if all the information in your name is correct and up to date. If not, then report it to CIBIL immediately so that your credit score isn’t negatively impacted. When making payments on time or rectifying defaults and delays, ensure your credit card issuer or bank records and reports this to CIBIL.
Avoid applying for too many loans: When you apply or enquire about loans from multiple banks, an enquiry is made. With more banks tapping in to find out your credit score. This in turn shows that you are desperate for credit. Whenever an enquiry is made with CIBIL, it reflects on your credit report. The more the number of enquiries, the more your credit score dips. So a good way to improve your credit score is to keep your enquiries to a minimum and obtain a copy of your score personally. Once you know your credit standing and if it is below expectation, prepare to have to pay higher rates on loans. Seek out those banks that will lend you money at the most affordable rates rather than approaching multiple banks.
Maintaining one's finance is of utmost importance for anyone. It helps you to achieve your future goals as well as lead a life peacefully. But unknowingly, in spite of trying your best, your finances are messed up and that lends you in trouble in day-to-day life as well as while applying for a loan or credit card. Here are the few aspects that can definitely guide you to have control on your finances.
A CIBIL score is a numeric representation of an individual’s creditworthiness. It is a three-digit number in the range of 300-900 that represents your creditworthiness. It is calculated after considering your credit history and repayment behavior. A CIBIL score of 750 and above is considered as ideal. Here’s how you can improve your credit or CIBIL score immediately.
If you want to increase your credit score, you have to improve your credit story by paying loans and Equated Monthly Instalments (EMIs) on time and monitoring credit report.
It takes minimum four months and maximum 12 months to increase the CIBIL score as per your repayment history. Most of the banks and fintech companies will provide loans and credit cards to the borrowers who have credit score close to 750.
You can get loan from 650 CIBIL score from Non Banking Financial Institutions. However, you need to pay the higher interest rates to the institutions.
To avail a personal loan, you need to have a CIBIL score between 720 and 750. This score means that you have good history and lenders will give approval to your personal loan application. Not only this but also good history will help you get personal loans at low interest rates.
CIBIL score cannot be increased in one day. It needs at least four to 12 months to see visible difference in your credit score.
TransUnion CIBIL is one of the leading credit information companies in India. The company maintains one of the largest collections of consumer credit information in the world. CIBIL Score plays a key role in the lives of consumers. Banks and other lenders check the CIBIL Score of the applicants before approving their loan or credit card application. Consumers can visit the official website of CIBIL to check their CIBIL Score and Report.
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