24-Mar-2018 written by : FSI-Team
Thanks to social media and the Internet in general, people are learning about the importance of their credit. It’s true; you need a good credit to get home loans, car loans, credit cards, and even jobs! But do you know that the way your credit looks right now is largely because of your own actions?
It's the credit bureaus that collect and analyse the financial data of the individuals, and it's the bank's responsibility to provide them with this information from their databases. However, it's you whose decisions make the biggest difference in the credit score. You can protect your credit from damage but if you are not careful, then you can hurt it too.
The following are some of the main ways how your decisions and behaviour affect your CIBIL or credit score:
Credit cards are incredibly popular all around the world. After all, if used wisely, they can solve all your urgent money requirements as well as make shopping easier and cheaper. However, a lot of people are not careful enough when using these and damage their score.
When you use credit cards, you affect the process of CIBIL score check in many ways:
If you use credit cards excessively, then it can have an adverse effect on your score. Generally speaking, if your utilizing only 30% to 35% of the credit card limit, then your credit should be fine. However, if it's more than that, then it could be harming your score. This is because when you max out your cards or use a large portion of their limits, then it makes the banks think that you are hungry for credit, which puts you in a bad light.
One of the greatest things about credit cards it the minimum payments feature. With this, you don't have to worry about the credit card bills as long as you pay just 2% to 4% of the balance. However, there is a catch.
Even though minimum payments allow you to save yourself from fines and penalties that may arise for not paying the credit card bills, your score is hurt in the process still. It may not reflect in the first few instances of CIBIL score check, but over time it can do a considerable amount of damage.
One of the easiest ways you can ruin your credit report and credit score is by ignoring them altogether. It's completely true because it’s almost like taking your eyes off the road while you are driving- you should expect something terrible to happen when you don’t focus and take responsibility.
When you don’t pay attention to your credit report, then you can easily become a victim of an identity fraud. This is because, if you monitor the report from time to time you can notice transactions or loan inquiries, etc. that you don’t recognize and check if these are a result of an identity theft.
By checking your report frequently, you can also find mistakes and errors in the same. By reporting these you can prevent your report from otherwise getting damaged.
Want to protect your score from damage? If your answer is “yes”, then make it a point to never send multiple loan or credit card applications at the same time. The reason behind this is that when you apply for a loan at multiple banks at the same time, they all apply for your credit report at the same time. When CIBIL receives so many inquiries it raises red flags for you, and it’s possible that they deduct your score considering your actions are a sign of credit desperation.
You must always give a gap of a week or so between each loan application to ensure that it doesn’t hurt your score.
So, by now it must be clear to you how you control your own credit score. It has nothing to do with the banks and credit agencies. And nothing can change for your credit unless you change your habits. So, take responsibility and try to develop some good personal finance habits. It can greatly help you in the long run.