Is a high CIBIL score a fad?

03-Jan-2017 written by : FSI-Team

In recent times, there has been a surfeit of information about credit usage and the need for a high CIBIL score. Whether it is financial institutions, the banking and finance industry at large and even regulatory bodies, we find most messages emanating from these sources underlining the need to maintain a high credit score.

While credit usage is universal, there are some cynics who question the need to maintain a high score or think it is not necessary to try to improve one’s CIBIL score and call it a fad that may pass soon. But is it correct to assume so? Let’s delve deeper into the subject to answer whether a high CIBIL score is really a fad or is it a matter of careful consideration.

Your CIBIL score is a three-digit numeric that is based on your “credit behaviour” or how you handle your credit. The details of the same are recorded in the CIBIL report. This report is compiled based on the information that the lenders pass on to the credit bureaus. This includes details such as repayment history, the age of your credit accounts, the mix of credit in your credit portfolio and how many times of how often have you applied for credit. All this information is collated to arrive at your CIBIL score, that becomes a measure of your credit health. Simply put, your CIBIL score becomes a yardstick by which a prospective lender uses to assess your creditworthiness.

Although the credit score is not the only yardstick by which a lender measures your credit health, it is certainly one of the important factors taken into consideration whenever an individual applies for any line of credit. A CIBIL score of 750 and above (out of 900) is considered satisfactory when applying for any fresh credit. A high score is more or less is an assurance that your credit application will be taken into consideration and your credit may get approved easily if you have already met the other eligibility criteria.

A high CIBIL score not only ensures that you get access to cheap and timely credit, it can come handy in more ways than one. In the modern times that we live in, corporates hiring new recruits are increasingly asking a probable candidate to submit their credit report that carries a high credit score. If you have a high score, it is assumed that you responsible and may prove to be a trustworthy and responsible employee who is an asset to the company.

Thus, as it is quite evident, a high credit score is much more than a fad and unlike what cynics may believe will not go away in a hurry. In fact, it would be no exaggeration to say that your CIBIL score will assume more importance in the future as it becomes a credit dominated world. Like in the west, it may not be long before you may be become eligible for lower insurance premium rates or can pay lower house rent owing to a high credit score.

If at this point you are wondering what you can do to improve your CIBIL score, here are some quick tips:

  • Always make timely repayments- This is the most important factor that determines your credit score and is also considered to be the first rule of credit usage. It is therefore important to make timely repayments on your credit lines, no matter what.
  • Maintain optimum credit utilisation- Credit utilisation is the total amount of credit you use as against the total amount of credit that is available with you. To maintain a good CIBIL score it is a must to keep your credit utilisation between 30-40%. Ideally your credit utilisation should not exceed 30%.
  • Maintain a good mix of credit- This is another factor that influences your score. To keep your CIBIL score intact it is necessary to maintain a good mix between secured and unsecured credit lines.
  • Do not apply for too much credit in quick succession- This gives the impression of you being “credit hungry” to a prospective lender. Besides every time, you apply for a new line of credit your score takes a hit because a hard inquiry.
  • Do not close your old credit cards- Lastly, but not the least what influences your CIBIL score is the age of your credit. Thus, it is not wise to close your credit card accounts even if you do not use them anymore.

Maintaining a high CIBIL score is not a fad but is an utmost necessity in the modern world that we live in. Thus, you should make a continual attempt to increase your credit score.



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