13-Mar-2019 written by : FSI-Team
Being credit healthy is as important as managing the physical health. Having said that, while a lot of people have an idea on what needs to be done to manage the corporal wellbeing, majority of people would be clueless when it comes to maintaining a healthy credit score. Good credit scores are important since they give seamless access to credit and other loan facilities. Non availability of funds at the time of need can be stressful and in some situations can even be devastating.
There are times when people find their credit score to be eroded and despite having all the intentions, are unable to manage them. Read on if you are not sure on how to keep your credit score healthy.
First and foremost, it is important to know what makes this numerical expression that, reflects on your credibility with the lending institutions. Broadly speaking, there are five parameters that construct this. And these are as follows:
Timely repayment on all across your debt accounts is of high importance. Please note that this factors carries 35% weightage in the over all score calculation. Check the account three days prior to any due date to ensure that enough funds are available to meet the obligations. A better idea will be to have the due dates shifted to within 3 to 4 days of the payday. This would help in ensuring repayment without the risk of low balances and bouncing of any instalment.
This is an important factor that will facilitate management of good credit scores. In a lot of cases, it has been observed, that people while pay their EMIs on time, they miss repayment of their credit card dues on time. Do not neglect payment of debt over the other just because you have the flexibility of paying. There have also been instances where people prioritize repayment according to the cost of the debt. This is not the right approach. All debts need to be repaid on time.
The amounts that you owe to the banks also impact the credit scores grossly. With a 30% influence on the score, the balances are sum total of your current outstanding against the sum of loans and credit limits on cards extended to you. While repayment of loans keeps depleting the principal outstanding every month, the same is not the case with credit cards. A lot of people experience their scores stumbling down on account of high card outstanding. You should ideally not have more than 30% utilization against the card limits. In the event it is higher, please arrange to repay and bring the balances within the prescribed limit.
Closing your old cards can result into a low CIBIL score. The length of credit history is not calculated on the closed accounts. And since the loans come with a fixed longevity, the cards help in positively impacting this factor that carries a 15% weightage. So do not close the older cards in case you have been able to get newer.
When in need of a loan, one would want to get the best deal. In the quest of achieving the objective do not apply for multiple loans. This can lead to negatively impacting both the score and the underwriting decision. Either connect with a professional who can guide you on the best loan for you or take out some time to research yourself by checking the websites and or calling the customer care of the lending institutions that you find are offering better terms on loan.