CIBIL is a credit bureau that collects and maintains records of individuals’ and commercial institutions’ payments related to loans and credit cards. CIBIL (Credit Information Bureau (India) Limited) is India’s first Credit Information Company, based in Mumbai.
CIBIL is calculated from one’s credit report, wherein CIBIL generates a 3 digit number which is considered by lenders to determine one’s creditworthiness for any loan, mortgage or credit card. Lower the credit score, the riskier the lender feels it is to lend an individual money. In such a scenario the lender tends to charge a higher interest rate if it is opting to approve one’s loan request at all. A credit score close to 900 is usually considered to be a good credit score. Whereas, maintaining a poor credit score would simply imply that lenders consider an individual to be on high credit risk.
In today’s credit-driven economy, a good credit score has become crucial to one’s financial success. Moreover, there are a number of other entities that use one’s credit history to make assumptions about one’s position to avail credit. For example, insurance companies, landlords and potential employers may all look into one’s credit score before making an informed decision about one’s credit score. A poor or lowered credit score could lead to denial of home loan or being charged higher insurance premiums.
Lenders may each have varying standards for what they consider to be a trustworthy credit score, so it‘s crucial to keep building one’s score to be able to receive benefits of low interest rates and overall lower monthly payments. Since credit impacts a number of aspects of our daily lives, bad credit is something that needs to be worked upon.
Here are a few ways to get started:
Pulling out one’s credit report
Firstly, one is required to study what is on one’s credit report before seeking out a sustainable solution to tackle the problem. It is wise to check one’s report for any discrepancies and ensuring that no incorrect entries are made and all timely payments are duly recorded and submitted by one’s lender to the CIBIL. Only after this, should one set an achievable target to work upon every month.
Avoid applying for fresh credit
It is suggested that one should avoid applying at another bank for a loan right after discovering that one has a poor credit score since the more the number of inquiries a lender puts into the CIBIL about one’s score, the lower it tends to go. In such a case, it is advisable to hold off applying for fresh credit till a good credit score is obtained.
Pay in full and on time, each month
One of the easiest ways to prove that one is responsible is to not use the credit card for things that one won’t be able to pay off on time and in full every month. Being late on one’s payments have a heavy and negative impact on the credit score. Furthermore, there is no advantage in only paying the minimum amount that is due on one’s credit card since it will only result in further interest and does nothing to improve one’s credit score. To rebuild one’s credit history, it is critical to make timely payments on one’s current debt. Successfully completing just one or two timely payments won’t bring about a quick and dramatic jump in one’s credit score. However, discreetly utilizing most or all of these tips simultaneously over a period of time will surely boost one’s credit score, the results of which one could start observing within 6 to 12 months (or possibly sooner), depending on one’s unique financial situation.
How to improve CIBIL Score
Keep a Check on your Credit Report
One should keep a regular check on his or her credit report as sometimes it reflects an issue which is due to any technical error or with lender. In such cases, your score is affected without any default on your part. Error shall be rectified at the earliest to avoid further confusion. Therefore, either apply online or report such issues with the concerned authorities.
Hide your Credit Hungry Behavior
There is a trend to be noticed that too many credit inquiries in your CIBIL database by financial institutions reflect credit hungry behavior of the borrower. These situations may arise via availing multiple loans simultaneously, such as personal, car and education loans etc. On an average a person must have 2 loans under his or her name.
Maintain a healthy Mix of credit
Maintaining a mix of credit is always beneficial. For Example, secured loans like home loans improve CIBIL Score as they build long-term appreciating asset, whereas unsecured loans like car loan, personal loan, credit card debt etc. impact negatively on your CIBIL Score.
Review your credit history frequently
Reviewing credit report regularly and raising any discrepancy for resolution builds credibility and credibility improves your CIBIL Score. Good credit history is generated with timely payments and responsible credit behavior is a key to creditworthiness.
Maintain card utilization ratio
Try not to ever exceed your credit card utilization ratio between 30-40 % as to maintain it below the said proportion increases your CIBIL score and makes it easier to apply for loans or credit cards in future.
Hence, it is always preferred to maintain a high credit score to avail the benefits of getting loans at a lower interest rates. To check your credit score for FREE, please login to Paisabazaar.com and get regular updates on your CIBIL report.