Is your CIBIL score pulling you down?

31-May-2016 written by : FSI-Team

With credit scores being integral to an individual’s financial life, it is no wonder that understanding the score and what it is about takes on such an important role. A numeric representation of your credit health, scores range from 300 to 900, and help a lender judge the creditworthiness of a person. A person with a higher score is viewed as likely to be more solvent and hence would get an advantage when it comes to availing of a fresh line of credit, in terms of better and more competitive interest rates and other conditions. Further, it also gives you access to a loan when you really require one.

What then is a CIBIL score?

A CIBIL score is nothing but a credit score, generated by India’s oldest credit bureau, CIBIL. While there are three other market players, people tend to call a credit score as a CIBIL score colloquially. However whether you call for a copy of your credit report from CIBIL or any other bureau doesn’t matter, what is more important is to stay on top of things and ensure that your report reflects accurate and complete information. This is possible only by checking your report at regular intervals, such as annually, or before you apply for a loan or credit card, so that you can ascertain roughly where you stand.

What are the factors that determine a CIBIL score?

There are several factors taken into account when building the CIBIL score. These include:

  • Repayment history, or repayment track record
  • Amount owed, or outstanding
  • Credit history
  • Credit mix (of both secured and unsecured products)
  • New credit

The weightage or importance given to each of these parameters differs while calculating the score, but each of them does affect the score in a different way.

Tips to better your credit score

So now that you know the importance of a credit score and what factors are considered while determining the same, let’s take a look at tips by which you can learn how to increase CIBIL points.

Check your credit report – The first thing to do is to call for a copy of your credit report. Go through it at length, understand the information therein and ascertain whether it is accurate and up to date. For instance, if an old closed account reflects as open still, it impacts your score. Similarly if there is mention of an account that does not pertain to you, you need to have it rectified immediately. This is your starting point in order to improve CIBIL score.

Make timely payment – Every time you delay or worse, skip making a payment altogether, you are damaging your credit score. This is because one of the primary factors considered is how you manage debt, and your repayment track record is important. If you tend to forget payment due dates, consider setting up alerts on your mobile device. Alternately, you could opt for options such as ECS mandates and auto debit from your bank account to make sure the payment is made in time.

Know your credit utilisation limit – While your card may have a high limit and you can indeed spend the entire amount, keep in mind that at the end of the month, the card bill that comes in ideally needs to be paid off in full. Further, if you tend to make minimal payments and roll over dues, you are more likely to be prone to falling into debt traps. The ideal credit utilisation limit across all your credit cards is 30 percent, and exceeding that on a regular basis can be an alarming sign. Typically, someone who is insolvent or having trouble making ends meet is likely to utilise the credit score to the maximum extent consistently.

Retain good debt – When you have for instance, a credit card which has been serviced well for a while, it makes sense to retain that card and not close the account. This serves as a track record to indicate good credit behaviour, one that a lender will look at favourably. Hence if you have made timely payments and not had any other black marks against the account, retaining it by making even infrequent small purchases to keep it going will work in your favour.

Get professional help – If you believe that working on your credit score is not something you can manage on your own, remember that help is always at hand. With the services of a credit health management company such as Credit Sudhaar you can over time learn how to correct CIBIL report and make the most of your score.

The bottom line

If your CIBIL score is pulling you down, work on it before it restricts your financial movement and you lose out on opportunities you would have otherwise benefitted from. It is always easier to damage your score than to rebuild it, as there is no quick-fix method one can adopt. Hence, to conclude, make your score work for you by treating it right.



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