24-Nov-2017 written by : FSI-Team
Have you ever applied for a line of credit and got rejected? The lender gave you a reason why your credit line was declined; the reason was a low cibil score. What is a credit score? How do I even have a credit score if I have not applied for any loan in the past? What are these scores and how are they bifurcated? How do I get a credit report? These are the questions which arise if you are taking a credit and do not know what a credit score is. We will be solving this remedy for you.
Whenever you apply for a loan or a credit card, the lender does a thorough background check of many criteria's and one of those is your cibil score check. The credit score varies through different credit bureaus, in India cibil as a bureau is preferred by most lenders to do a background check. The credit score ranges from 300 to 900, the higher your score is, the better chance you have for getting a loan with easy process. If your score is great you stand a chance to negotiate on the loan's interest rate.
It takes a lot of time and financial stability to build a good score, but if you do not have a financial integrity you will see your score getting a dip in no time.
We will learn some key factors which influences your Credit Score,
Multiple loans can definitely influence the score. A lot of people have different type of loan on their name such as a home loan, a car loan and so on, if you multiple loans on your name then you will need to make all your payment on time. This is a tricky one, where people take loans according to their requirements and then fail to make payment and end up in the bottom pile of defaulters hampering their credit score.
Multiple loan and credit card means different EMIs and different due dates to make the payments on time. Your payment history plays a very important role to enhance your score. Almost all the creditors go for a thorough cibil check before they can lend you a line of credit or a credit card and the payment history is one of the main components. If you have multiple loans and find it hard to remember all your due dates, try installing a good financial mobile application which will set financial reminders for you and you would never skip a payment by mistake. A good payment history can lead you to financial pinnacle and also can drag you down to financial me ham if not adhered properly.
What type of loans and line of credit you own also can determine your credit score. Supposedly you have six to seven credit cards; you have opted for these cards for financial backup and rarely use them you will be in financial danger. Owning a credit card and not using it is more dangerous than not owning a credit card at all. You should make small transactions with your card ad make all the payments associated with the card on time so that your score is always going upwards. Similarly there are a lot of hidden factors with different financial products, if understood can help you improve your cibil score in no time at all, but on the other hand there are some financial products which are very sensitive to your cibil score and can damage your score even if there is a slight mistake from your end.
Whenever you apply for a loan from any lender, your credit inquiry is made by the lender. Similarly with a credit card as well. A lot of people do not understand this process and go for every opportunity they find to get a line of credit. If you receive a call from telesales offering you the best credit card in market, understand to process the card they will do a credit history check and with each credit check your score goes down with the entry on your report stating you tried opting for a credit card and were denied, the next time if you genuinely apply for a loan with a bank, all these entries will reflect towards your credit score.
Having a credit card is fun. If you are in urgent need to money and get your loan processed in no time have its own perks, but if you understand the technicality of maintaining a proper cibil score you will make a huge difference on your financial health. Simply make all your payments on time and go for minimum loans at a time, this is not rocket science, you will do just fine.