Credit scores is an important metric in order to get a loan seamlessly, including personal loan, home loan and auto loan. When you approach the lender for a loan, the lender checks your CIBIL score or another credit score and decides on the loan sanction and its interest rate. Hence, CIBIL score is very important. Here’s all about the CIBIL score and what mistakes you should avoid to keep the credit score good.
What Is CIBIL Score?
Ranging from 300 to 900, the CIBIL Score is a three-digit number. The higher score you have, the better it is. Generally, a score above 750 is considered good where the chances of loan approval become higher. This is a numeric summary of your credit history and a reflection of your credit profile, showing your credit behaviour as a borrower. It also reveals whether you have ever defaulted on any repayment in the past. This score gives an overall indication of your creditworthiness and history.
Apart from CIBIL, there are other major credit information agencies also including Experian, Equifax and CRIF.
Mistakes To Avoid To Keep Your CIBIL Score Good
Don’t Delay Repayment of Dues: If you want to maintain a good CIBIL score, the first and foremost thing is to be strict with the repayments — pay within time and never delay. Repayment of loans or credit card dues has a very big impact on your CIBIL score.
Don’t Keep You Credit Card Limit Exhausted Always: It is advised to get a credit card with a higher top limit, if you are struggling to stay within the existing limit of the card. The credit utilisation ratio should be limited to 30 per cent to have a good CIBIL score.
Diversified Loan Products: It is better to diversify the loan portfolio with a good mixture of both secured and unsecured debt in order to get a high CIBIL score. A credit card is an unsecured debt, whereas a home or vehicle loan is a secured debt.
Don’t Apply for Multiple Loans or Credit Cards In Short Time: When you approach a lender for credit, the lender checks your credit score. It’s call ‘hard enquiry’ and remains up to 2 years on your CIBIL report. Multiple hard enquiries in a short period of time can damage your credit score significantly.
Don’t Close You Old Credit Accounts: Closing old credit accounts, though may seem good, reduces your available credit limit and thus increases your credit utilisation ratio, thus adversely affecting your CIBIL score.
According to a TransUnion CIBIL’s report, about 79 per cent of the loans are sanctioned to people who have a CIBIL score of 750 and above. Having a higher CIBIL score not only makes it easier for the applicant to get loans easily, but he also gets the loan at a relatively lower rate of interest.
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