Having a good credit score is key to quick and easy lending. The first thing a lender can test, when you apply for a loan, is your credit score. If you have a good credit score (this is considered a good CIBIL Transunion score of over 750) your loan application will go for further processing. But if your loan score is downside down, your loan application will be rejected outright.
Hence, having a good credit score is very necessary. Also, note that you can’t build a good credit score overnight as it’s based on your credit history measured.
Here are some of the factors that affect our credit score.
Irresponsible Payment Behaviour:
Your payment history affects your ratings the most. Paying your credit-card bills and loaning EMIs on time every month is critical. 30-day delinquency can reduce your score by 100 points according to a CIBIL analysis (reported by the Financial Express). If you have multiple credit cards as well as loans, it is advisable to set up reminders and alerts, to avoid or delay missing payments. Any missed or overdue payments reflect poorly on your score and suggest you don’t agree with repaying credit.
High Credit Utilisation Ratio:
Keeping an eye on your credit utilization ratio is one of the golden rules you will follow. It’s the amount of credit used that is open to you in proportion to the credit limit. Ideally, according to experts, using 30 percent of your credit limit should not be surpassed. For instance, if your credit card limit is Rs.1 lakh, you should be spending about Rs.30,000. If you’ve used your credit limit by more than 50 percent, it can have a negative impact on your ranking. Having a high exposure to credit will give a red flag to lenders as it means that you are at a higher risk of default.
Just make sure you clear off your outstanding debts. When you’ve expressed unpaid payments on your credit report, your ranking takes a toll. It is advisable that the outstanding duties be paid even if the sum is small.
Paying only the Minimum Amount Due:
A minimum due balance is a small portion of the principal which is unpaid each month. When you continuously pay only the minimum amount due you will slip into a debt trap. To roll over the debt by paying only the minimum amount leads to a compounding of interest on your outstanding balance. Therefore, paying your credit card bills in full is recommended. It also reflects poor behavior in repayment.
Making Multiple Credit Applications:
If you apply for a loan or credit card, lenders will want to test your creditworthiness and by taking out your credit report they will do so. This is called a difficult investigation. When you send out multiple applications, it will mean multiple credit inquiries are taking place at about the same time. Such challenging inquiries are recorded and negatively affect your ranking. This will make you look hungry about credit.
If your application for a loan or credit card has recently been rejected, it is advised not to apply for a credit immediately. Better to improve your score on CIBIL and then apply again.
Errors in your CIBIL Report:
Your CIBIL report contains a detailed record of both your current and past credit accounts. If your report contains any errors it may hamper your ranking. So if you have any inconsistencies in your report you need to immediately rectify them.
Such mistakes just need to be corrected by your lenders. CIBIL does not correct documentation without notice by borrowers of the changes to be made.
It can also help you identify if you’re a victim of identity theft by checking your credit report.
Not Having a Credit Mix:
Maintaining a healthy balance of secured and unsecured lending is critical. Home loans and auto loans are examples of secured loans, while an unsecured loan is an example of a credit card. If you have a high number of just one credit form, this can impact your ranking. Additionally, if you’ve got a good mix of different types of loans, it means you have experience handling all types of loans.
Length of Credit History:
In simple terms, credit history means the total number of years that have passed since you opened a credit account for the first time. If you have a long credit history, this will help borrowers make a sound judgment when they give you credit. It is better to focus on building a credit history in the early stage of life as you’ll have a good record of credit transactions by the time you apply for a home or car loan.
Closing old Credit Card Accounts:
Credit cards are a great instrument for building a credit history. Nonetheless, you end up losing a long credit history associated with it when you close out your old accounts. Therefore, if you have used the card for a large number of years, it is recommended that you keep it open as long as possible, if feasible. Try locking out a relatively new card.
Benefits of Having a High CIBIL score
- Quicker approval for loans and credit cards
- Cheaper interest rates on loans
- Better deals on credit cards
- Credit cards with a higher credit limit
- Discount on processing fee and other charges for loan applications
It is important to check your CIBIL score from time to time. Make sure your score is above 750 to enjoy better access to credit products. You are entitled to receive one detailed credit report for free from CIBIL per the calendar year.
To know more about increasing your cibil credit score, you can visit our website https://www.jayantharde.com or contact our representative at +91 712 2282029 or meet us at 51, Gurukripa, Old Sneha Nagar, Wardha Road, Nagpur – 440015.