Maintaining a good CIBIL score is always important for faster loan approval. However, there are many habits and factors that negatively affect an individual's CIBIL score. Know about all the mistakes that can be avoided for a good CIBIL score
As the economy emerges from the fear of uncertain covid lockdown, the demand for loans is also on the rise as people are looking to start afresh with their businesses, ventures etc. Maintaining a good CIBIL score is important to increase your chances of instant loan approvals.
The credit history of an individual is tracked by his/her CIBIL score. CIBIL Score is a three digit number which is a reflection of their credit history. A three digit number lies between 300 and 900. It is a major measure for all financial banks to check the creditworthiness of the borrower. Credit score is managed by Credit Information Bureau Limited, one of the credit bureaus in India.
The CIBIL score is not built in a day and requires a long credit history of the borrower. It takes around 18-36 months to build a healthy CIBIL score.
However, a variety of practices and habits related to spending, debt repayment and credit card usage can have a negative impact on an individual's CIBIL score. Learn about all the habits that one should avoid in order to maintain a healthy CIBIL score.
1. Be aware of excessive credit
It is always wise to keep a tab on your spending habits. Spending more than income will increase the need for loan. Borrowing money for a long period of time due to excessive spending can result in a huge debt which can lower your CIBIL rating.
2. Avoid Unpaid Credit Card Bills
Honesty is important to earn a good CIBIL rating. If you do not pay your credit card bills for a long time and are also an irregular payer of your loan installments, then this is the right time to change these habits for a healthy CIBIL score. Absence of timely EMI and credit payments indicates poor planning of funds.
3. Do not take only unsecured loans or multiple loans
Focusing only on unsecured loans like personal loans, credit cards etc. can impact your CIBIL score. It is always advised to maintain a healthy mix of secured loans like home loan, education loan, auto loan etc. to generate a healthy score of income. On the other hand, applying for multiple loans at the same time can put you under the scanner of financial institutions and reduce your credibility.
4. Don't miss your EMIs or payments on existing loans
Like unpaid credit card bills, unpaid EMIs and loan installments can be detrimental to your credit score. A high CIBIL score does not arise without taking a loan or borrowing. Also, it is equally important to maintain consistency in repaying that loan or credit on time. Delayed payment will negatively affect your CIBIL score and eventually reduce your credibility with financial institutions.
5. Don't Miss Tracking Your CIBIL Report
One can improve his/her credit score only if he/she is aware of his/her current status. Hence, irregular tracking of CIBIL reports increases the chances of your CIBIL score deteriorating as you will not be able to rectify technical errors and others. Anyone can request their CIBIL report by visiting www.cibil.com.
6. Beware of Joint Accounts
It is better to avoid becoming a joint account holder or a guarantor for someone else's loan. Any default on that loan will also directly affect the CIBIL score of the joint account holder. So it is better to take such responsibility only for those whom you trust well.
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