CIBIL & Its Importance
Your CIBIL Score is the resemblance of your credit history, it denotes how responsible you are/were with your borrowed funds. A CIBIL of 750 and above is always considered as a good credit score, whereas a CIBIL of below 700 is considered as a low credit score.
Your CIBIL basically denotes your financial fitness. Generally, whenever you take a loan or a credit card banks/NBFCs reports your each and every repayment to the credit unions. This record creates your credit history and in points, it is known as CIBIL score. All this makes your credit score an important criterion for the lenders to judge your creditworthiness and hence they check for your CIBIL score whenever you apply for a loan.
A good credit score can do a lot, such as it can help you get a better interest rate for your new loan or can provide you with a chance to negotiate for the down payment of your car loan or home loan. Whereas having a low CIBI can affect you adversely and can even lead to the rejection of your loan application. However, with a low CIBIL, you may get a loan approved but in that case, the interest rate charged will be higher.
But only to have a good CIBIL is not enough, you need to take effective measures in terms to maintain it.
Below are a few habits following which can result in you to maintain your credit score.
Be Timely with your Payments/Bills
As said above, all your payments are reported to the credit union by your lender and credit card provider. So, even a single day delay in your payment can be reflected in your credit history. To avoid this, try to be timely with all your payments.
You can set reminders in your mobile phones to avoid such a mistake and in case you are in some financial trouble, try to inform your lender regarding this and take time from them.
Keep your Credit Card Balance Low
The higher your credit card balance is the higher is the possibility of not making the full payment and delayed payments too. To avoid such a situation try to keep your credit card balance low. However, it is always advised to use your credit card for making most of the payments in order to maintain a good CIBIL score. But this can go wrong when you use your credit card every now and then and you are able to pay the bills on time.
To maintain a good credit score along with timely payments keeping your credit card balance low is also important. To be on the safer side and for balanced finances, your credit card balances should be within 30 per cent of your total credit limit.
Avoid Taking Too Much Debt at Once
Going into more debt at once can lead to a low CIBIL score. This is because when you take too many loans at once your income to debt ratio decreases which impacts your CIBIL.
So to maintain a good credit score try not to take more loans at the same time. Take as much as you can repay easily without disturbing your budget. Consider the repayment plan at first. Opting for multiple loans at once can show that you credit hungry and already in an unforgiving cycle where you have insufficient funds. This can result in reduced CIBIL and further rejection of your new loan applications.
Manage your Debt Carefully
Your debt is the main reason for your good or bad CIBIL. Even a single missed payment for your EMI can lead to a negative impact on your CIBIL score. So, to maintain a good credit score it is equally important to manage your debt carefully. Before taking any debt first plan for its repayment, if you can repay it successfully then only opt for it.
Maintain Your Older Credit Cards
Maintaining your older credit cards can add a lot to your credit score. This is because old credit cards help you to maintain a lengthier credit history. This will further result in an increased/good credit score. But doing this is suggested only as long as you are able to pay the bills on time. Else it can work negatively.
Monitor Your Credit Score
Monitoring your CIBIL Score on a regular basis has lots of importance that many of you don’t know. There are chances that your Credit history may contain faults or mistakes. These defects are very important to be rectified and corrected.
This may happen when your lender delays in providing the update or it can also happen due to incorporating incorrect information. These mistakes can hurt your CIBIL and affect your future creditworthiness as well. So this becomes very important to monitor your credit report at least once in a year and every before you apply for a loan. In case of any mistake send a letter to the credit unions and your lender as well.
There are many benefits of having good CIBIL, this includes getting a loan approved at a lower interest rate and you can also save money on the down payments of some of your loans. So, to avail of these benefits, it becomes important to maintain a good credit score. Following the above-mentioned points will surely help you do so.